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Did Hedge Funds Make The Right Call On Hope Bancorp, Inc. (HOPE) ?

We know that hedge funds generate strong, risk-adjusted returns over the long run, which is why imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, professional investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn’t mean that they don’t have occasional colossal losses; they do. However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, let’s examine the smart money sentiment towards Hope Bancorp, Inc. (NASDAQ:HOPE) and determine whether hedge funds skillfully traded this stock.

Is Hope Bancorp, Inc. (NASDAQ:HOPE) a buy, sell, or hold? The best stock pickers were becoming less confident. The number of long hedge fund positions retreated by 1 lately. Our calculations also showed that HOPE isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks). HOPE was in 18 hedge funds’ portfolios at the end of the first quarter of 2020. There were 19 hedge funds in our database with HOPE positions at the end of the previous quarter.

Video: Watch our video about the top 5 most popular hedge fund stocks.

If you’d ask most shareholders, hedge funds are perceived as underperforming, outdated financial vehicles of years past. While there are more than 8000 funds in operation today, Our researchers choose to focus on the bigwigs of this group, around 850 funds. These hedge fund managers command bulk of all hedge funds’ total capital, and by tailing their matchless stock picks, Insider Monkey has come up with several investment strategies that have historically outstripped the market. Insider Monkey’s flagship short hedge fund strategy outperformed the S&P 500 short ETFs by around 20 percentage points annually since its inception in March 2017. Our portfolio of short stocks lost 36% since February 2017 (through May 18th) even though the market was up 30% during the same period. We just shared a list of 8 short targets in our latest quarterly update .

Richard Pzena - Pzena Investment Management

Richard S. Pzena of Pzena Investment Management

At Insider Monkey we scour multiple sources to uncover the next great investment idea. With Federal Reserve creating trillions of dollars out of thin air, we believe gold prices will keep increasing. So, we are checking out gold stocks like this small gold mining company. We go through lists like the 10 most profitable companies in America to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. Keeping this in mind we’re going to view the new hedge fund action regarding Hope Bancorp, Inc. (NASDAQ:HOPE).

How have hedgies been trading Hope Bancorp, Inc. (NASDAQ:HOPE)?

At the end of the first quarter, a total of 18 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -5% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards HOPE over the last 18 quarters. With hedge funds’ sentiment swirling, there exists a select group of key hedge fund managers who were boosting their holdings meaningfully (or already accumulated large positions).

When looking at the institutional investors followed by Insider Monkey, Pzena Investment Management, managed by Richard S. Pzena, holds the biggest position in Hope Bancorp, Inc. (NASDAQ:HOPE). Pzena Investment Management has a $26.3 million position in the stock, comprising 0.2% of its 13F portfolio. Sitting at the No. 2 spot is GAMCO Investors, managed by Mario Gabelli, which holds a $4.7 million position; the fund has 0.1% of its 13F portfolio invested in the stock. Some other hedge funds and institutional investors that are bullish consist of Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital, Ken Griffin’s Citadel Investment Group and Renaissance Technologies. In terms of the portfolio weights assigned to each position Pzena Investment Management allocated the biggest weight to Hope Bancorp, Inc. (NASDAQ:HOPE), around 0.2% of its 13F portfolio. AlphaCrest Capital Management is also relatively very bullish on the stock, setting aside 0.1 percent of its 13F equity portfolio to HOPE.

Judging by the fact that Hope Bancorp, Inc. (NASDAQ:HOPE) has faced declining sentiment from the smart money, we can see that there lies a certain “tier” of funds who were dropping their full holdings in the first quarter. At the top of the heap, Israel Englander’s Millennium Management dumped the biggest position of the 750 funds followed by Insider Monkey, comprising close to $3.2 million in stock, and Noam Gottesman’s GLG Partners was right behind this move, as the fund said goodbye to about $2.8 million worth. These bearish behaviors are important to note, as aggregate hedge fund interest was cut by 1 funds in the first quarter.

Let’s now take a look at hedge fund activity in other stocks similar to Hope Bancorp, Inc. (NASDAQ:HOPE). We will take a look at SFL Corporation Ltd. (NYSE:SFL), Comstock Resources Inc (NYSE:CRK), TriMas Corp (NASDAQ:TRS), and Madrigal Pharmaceuticals, Inc. (NASDAQ:MDGL). This group of stocks’ market values are closest to HOPE’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
SFL 14 43537 0
CRK 3 2762 -4
TRS 13 71796 -2
MDGL 15 270102 -4
Average 11.25 97049 -2.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 11.25 hedge funds with bullish positions and the average amount invested in these stocks was $97 million. That figure was $43 million in HOPE’s case. Madrigal Pharmaceuticals, Inc. (NASDAQ:MDGL) is the most popular stock in this table. On the other hand Comstock Resources Inc (NYSE:CRK) is the least popular one with only 3 bullish hedge fund positions. Compared to these stocks Hope Bancorp, Inc. (NASDAQ:HOPE) is more popular among hedge funds. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 18.6% in 2020 through July 27th and still beat the market by 17.1 percentage points. Unfortunately HOPE wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on HOPE were disappointed as the stock returned 4.1% since the end of the first quarter and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.

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Disclosure: None. This article was originally published at Insider Monkey.