Hedge Funds Are Buying Shore Bancshares, Inc. (SHBI)

The financial regulations require hedge funds and wealthy investors that exceeded the $100 million holdings threshold to file a report that shows their positions at the end of every quarter. Even though it isn’t the intention, these filings to a certain extent level the playing field for ordinary investors. The latest round of 13F filings disclosed the funds’ positions on June 30th. We at Insider Monkey have made an extensive database of more than 873 of those established hedge funds and famous value investors’ filings. In this article, we analyze how these elite funds and prominent investors traded Shore Bancshares, Inc. (NASDAQ:SHBI) based on those filings.

Shore Bancshares, Inc. (NASDAQ:SHBI) was in 10 hedge funds’ portfolios at the end of June. The all time high for this statistic is 8. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. SHBI has seen an increase in hedge fund interest recently. There were 8 hedge funds in our database with SHBI holdings at the end of March. Our calculations also showed that SHBI isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings).

Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by 79 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.

Now we’re going to take a gander at the fresh hedge fund action regarding Shore Bancshares, Inc. (NASDAQ:SHBI).

Do Hedge Funds Think SHBI Is A Good Stock To Buy Now?

At the end of the second quarter, a total of 10 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 25% from the first quarter of 2020. Below, you can check out the change in hedge fund sentiment towards SHBI over the last 24 quarters. With the smart money’s capital changing hands, there exists an “upper tier” of notable hedge fund managers who were boosting their stakes significantly (or already accumulated large positions).

When looking at the institutional investors followed by Insider Monkey, Fourthstone LLC, managed by Phil Stone, holds the most valuable position in Shore Bancshares, Inc. (NASDAQ:SHBI). Fourthstone LLC has a $19.6 million position in the stock, comprising 8.3% of its 13F portfolio. Coming in second is Renaissance Technologies, which holds a $6.4 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Other professional money managers that hold long positions contain Matthew Lindenbaum’s Basswood Capital, Jeffrey Gendell’s Tontine Asset Management and Emanuel J. Friedman’s EJF Capital. In terms of the portfolio weights assigned to each position Fourthstone LLC allocated the biggest weight to Shore Bancshares, Inc. (NASDAQ:SHBI), around 8.34% of its 13F portfolio. EJF Capital is also relatively very bullish on the stock, setting aside 0.26 percent of its 13F equity portfolio to SHBI.

Consequently, specific money managers were breaking ground themselves. EJF Capital, managed by Emanuel J. Friedman, established the biggest position in Shore Bancshares, Inc. (NASDAQ:SHBI). EJF Capital had $2.9 million invested in the company at the end of the quarter. Ken Griffin’s Citadel Investment Group also initiated a $0.3 million position during the quarter.

Let’s also examine hedge fund activity in other stocks similar to Shore Bancshares, Inc. (NASDAQ:SHBI). These stocks are J. Jill, Inc. (NYSE:JILL), Tuscan Holdings Corp. II (NASDAQ:THCA), BayCom Corp (NASDAQ:BCML), The Bank of Princeton (NASDAQ:BPRN), Second Sight Medical Products Inc (NASDAQ:EYES), Twin Disc, Incorporated (NASDAQ:TWIN), and Resonant Inc. (NASDAQ:RESN). This group of stocks’ market valuations resemble SHBI’s market valuation.

View table here if you experience formatting issues.

As you can see these stocks had an average of 7.7 hedge funds with bullish positions and the average amount invested in these stocks was $28 million. That figure was $41 million in SHBI’s case. Tuscan Holdings Corp. II (NASDAQ:THCA) is the most popular stock in this table. On the other hand The Bank of Princeton (NASDAQ:BPRN) is the least popular one with only 5 bullish hedge fund positions. Shore Bancshares, Inc. (NASDAQ:SHBI) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for SHBI is 68.3. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 25.7% in 2021 through September 27th and still beat the market by 6.2 percentage points. Hedge funds were also right about betting on SHBI as the stock returned 7% since the end of Q2 (through 9/27) and outperformed the market. Hedge funds were rewarded for their relative bullishness.

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