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Hedge Funds Cautiously Watching BayCom Corp (BCML)

In this article we will take a look at whether hedge funds think BayCom Corp (NASDAQ:BCML) is a good investment right now. We check hedge fund and billionaire investor sentiment before delving into hours of research. Hedge funds spend millions of dollars on Ivy League graduates, unconventional data sources, expert networks, and get tips from investment bankers and industry insiders. Sure they sometimes fail miserably, but their consensus stock picks historically outperformed the market after adjusting for known risk factors.

BayCom Corp (NASDAQ:BCML) shares haven’t seen a lot of action during the first quarter. Overall, hedge fund sentiment was unchanged. The stock was in 6 hedge funds’ portfolios at the end of the first quarter of 2020. At the end of this article we will also compare BCML to other stocks including Fortress Biotech Inc (NASDAQ:FBIO), American Realty Investors, Inc. (NYSE:ARL), and Lifevantage Corporation (NASDAQ:LFVN) to get a better sense of its popularity.

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

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 58 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.

Ken Griffin

Ken Griffin of Citadel Investment Group

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, 2020’s unprecedented market conditions provide us with the highest number of trading opportunities in a decade. So we are checking out stocks recommended/scorned by legendary Bill Miller. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind let’s view the recent hedge fund action surrounding BayCom Corp (NASDAQ:BCML).

Hedge fund activity in BayCom Corp (NASDAQ:BCML)

Heading into the second quarter of 2020, a total of 6 of the hedge funds tracked by Insider Monkey were long this stock, a change of 0% from the previous quarter. On the other hand, there were a total of 4 hedge funds with a bullish position in BCML a year ago. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

More specifically, EJF Capital was the largest shareholder of BayCom Corp (NASDAQ:BCML), with a stake worth $7.8 million reported as of the end of September. Trailing EJF Capital was Mendon Capital Advisors, which amassed a stake valued at $5.9 million. Royce & Associates, Two Sigma Advisors, and Citadel Investment Group were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Mendon Capital Advisors allocated the biggest weight to BayCom Corp (NASDAQ:BCML), around 2.9% of its 13F portfolio. EJF Capital is also relatively very bullish on the stock, designating 1.65 percent of its 13F equity portfolio to BCML.

We view hedge fund activity in the stock unfavorable, but in this case there was only a single hedge fund selling its entire position: Millennium Management. One hedge fund selling its entire position doesn’t always imply a bearish intent. Theoretically a hedge fund may decide to sell a promising position in order to invest the proceeds in a more promising idea. However, we don’t think this is the case in this case because only one of the 800+ hedge funds tracked by Insider Monkey identified as a viable investment and initiated a position in the stock (that fund was Citadel Investment Group).

Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as BayCom Corp (NASDAQ:BCML) but similarly valued. These stocks are Fortress Biotech Inc (NASDAQ:FBIO), American Realty Investors, Inc. (NYSE:ARL), Lifevantage Corporation (NASDAQ:LFVN), and Trecora Resources (NYSE:TREC). This group of stocks’ market values are similar to BCML’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
FBIO 5 5655 -3
ARL 1 303 0
LFVN 8 14970 0
TREC 8 14950 0
Average 5.5 8970 -0.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 5.5 hedge funds with bullish positions and the average amount invested in these stocks was $9 million. That figure was $17 million in BCML’s case. Lifevantage Corporation (NASDAQ:LFVN) is the most popular stock in this table. On the other hand American Realty Investors, Inc. (NYSE:ARL) is the least popular one with only 1 bullish hedge fund positions. BayCom Corp (NASDAQ:BCML) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. 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 13.9% in 2020 through June 10th but beat the market by 14.2 percentage points. Unfortunately BCML wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on BCML were disappointed as the stock returned 19.8% during the same time period 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 many of these stocks already outperformed the market so far this year.

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