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Hedge Funds Are Betting On Banc of California Inc (BANC)

It is already common knowledge that individual investors do not usually have the necessary resources and abilities to properly research an investment opportunity. As a result, most investors pick their illusory “winners” by making a superficial analysis and research that leads to poor performance on aggregate. The Standard and Poor’s 500 Index returned 7.6% over the 12-month period ending November 21, while more than 51% of the constituents of the index underperformed the benchmark. Hence, a random stock picking process will most likely lead to disappointment. At the same time, the 30 most favored mid-cap stocks by the best performing hedge funds monitored by Insider Monkey generated a return of 18% over the same time span. Of course, hedge funds do make wrong bets on some occasions and these get disproportionately publicized on financial media, but piggybacking their moves can beat the broader market on average. That’s why we are going to go over recent hedge fund activity in Banc of California Inc (NYSE:BANC) .

Banc of California Inc (NYSE:BANC) shareholders have witnessed an increase in support from the world’s most successful money managers in recent months. There were 17 hedge funds in our database with BANC holdings at the end of the previous quarter. At the end of this article we will also compare BANC to other stocks including Ethan Allen Interiors Inc. (NYSE:ETH), Teekay Offshore Partners L.P. (NYSE:TOO), and Sun Hydraulics Corporation (NASDAQ:SNHY) to get a better sense of its popularity.

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We care about hedge fund sentiment because historically hedge funds’ stock picks delivered strong risk adjusted returns. There are certain segments of the market where hedge funds’ stock picks performed much better than its benchmarks. For instance, the 30 most popular mid-cap stocks among the best performing hedge funds returned 18% over the last 12 months outpacing S&P 500 Index by more than 10 percentage points. We developed this strategy 2.5 years ago and started sharing its picks in our quarterly newsletter. It bested the S&P 500 Index ETFs by delivering a solid 39% vs. 22% gain for its benchmarks.

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With all of this in mind, let’s check out the new action encompassing Banc of California Inc (NYSE:BANC).

What have hedge funds been doing with Banc of California Inc (NYSE:BANC)?

Heading into the fourth quarter of 2016, a total of 21 of the hedge funds tracked by Insider Monkey were long this stock, a change of 24% from one quarter earlier. By comparison, 13 hedge funds held shares or bullish call options in BANC heading into this year. With the smart money’s capital changing hands, there exists an “upper tier” of noteworthy hedge fund managers who were upping their stakes considerably (or already accumulated large positions).

HedgeFundSentimentChart

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Renaissance Technologies, led by Jim Simons, holds the biggest position in Banc of California Inc (NYSE:BANC). Renaissance Technologies has a $18.2 million position in the stock, comprising less than 0.1%% of its 13F portfolio. The second most bullish fund manager is Robert I. Usdan and Wayne K. Goldstein of Endicott Management, with a $17.5 million position; the fund has 7.8% of its 13F portfolio invested in the stock. Some other hedge funds and institutional investors with similar optimism include Israel Englander’s Millennium Management, Principal Global Investors’s Columbus Circle Investors and Mark Lee’s Forest Hill Capital. We should note that none of these hedge funds are among our list of the 100 best performing hedge funds which is based on the performance of their 13F long positions in non-microcap stocks.

Now, some big names were leading the bulls’ herd. Columbus Circle Investors, led by Principal Global Investors, initiated the biggest position in Banc of California Inc (NYSE:BANC). Columbus Circle Investors had $10 million invested in the company at the end of the quarter. Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital also made a $0.6 million investment in the stock during the quarter. The other funds with new positions in the stock are John Overdeck and David Siegel’s Two Sigma Advisors, Gavin Saitowitz and Cisco J. del Valle’s Springbok Capital, and Matthew Hulsizer’s PEAK6 Capital Management.

Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Banc of California Inc (NYSE:BANC) but similarly valued. We will take a look at Ethan Allen Interiors Inc. (NYSE:ETH), Teekay Offshore Partners L.P. (NYSE:TOO), Sun Hydraulics Corporation (NASDAQ:SNHY), and Solar Capital Ltd. (NASDAQ:SLRC). This group of stocks’ market values are similar to BANC’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
ETH 13 100214 -3
TOO 10 119379 0
SNHY 5 95714 -2
SLRC 11 42231 0

As you can see these stocks had an average of 9.75 hedge funds with bullish positions and the average amount invested in these stocks was $89 million. That figure was $78 million in BANC’s case. Ethan Allen Interiors Inc. (NYSE:ETH) is the most popular stock in this table. On the other hand Sun Hydraulics Corporation (NASDAQ:SNHY) is the least popular one with only 5 bullish hedge fund positions. Compared to these stocks Banc of California Inc (NYSE:BANC) is more popular among hedge funds. Considering that hedge funds are fond of this stock in relation to its market cap peers, it may be a good idea to analyze it in detail and potentially include it in your portfolio.

Disclosure: None