How do you pick the next stock to invest in? One way would be to spend days of research browsing through thousands of publicly traded companies. However, an easier way is to look at the stocks that smart money investors are collectively bullish on. Hedge funds and other institutional investors usually invest large amounts of capital and have to conduct due diligence while choosing their next pick. They don’t always get it right, but, on average, their stock picks historically generated strong returns after adjusting for known risk factors. With this in mind, let’s take a look at the recent hedge fund activity surrounding Riverview Bancorp, Inc. (NASDAQ:RVSB) and determine whether hedge funds had an edge regarding this stock.
Is Riverview Bancorp, Inc. (NASDAQ:RVSB) a cheap investment now? Investors who are in the know were turning bullish. The number of long hedge fund positions rose by 1 in recent months. Our calculations also showed that RVSB 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). RVSB was in 11 hedge funds’ portfolios at the end of the first quarter of 2020. There were 10 hedge funds in our database with RVSB holdings at the end of the previous quarter.
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.
At Insider Monkey we scour multiple sources to uncover the next great investment idea. There is a lot of volatility in the markets and this presents amazing investment opportunities from time to time. For example, this trader claims to deliver juiced up returns with one trade a week, so we are checking out his highest conviction idea. A second trader claims to score lucrative profits by utilizing a “weekend trading strategy”, so we look into his strategy’s picks. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We recently recommended several stocks partly inspired by legendary Bill Miller’s investor letter. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 in February after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind we’re going to analyze the key hedge fund action encompassing Riverview Bancorp, Inc. (NASDAQ:RVSB).
What have hedge funds been doing with Riverview Bancorp, Inc. (NASDAQ:RVSB)?
At the end of the first quarter, a total of 11 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 10% from the previous quarter. On the other hand, there were a total of 8 hedge funds with a bullish position in RVSB a year ago. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Riverview Bancorp, Inc. (NASDAQ:RVSB) was held by Renaissance Technologies, which reported holding $2.2 million worth of stock at the end of September. It was followed by Elizabeth Park Capital Management with a $1.7 million position. Other investors bullish on the company included Arrowstreet Capital, Castine Capital Management, and Winton Capital Management. In terms of the portfolio weights assigned to each position Elizabeth Park Capital Management allocated the biggest weight to Riverview Bancorp, Inc. (NASDAQ:RVSB), around 1.3% of its 13F portfolio. Zebra Capital Management is also relatively very bullish on the stock, earmarking 0.32 percent of its 13F equity portfolio to RVSB.
Now, some big names were breaking ground themselves. Elizabeth Park Capital Management, managed by Fred Cummings, established the largest position in Riverview Bancorp, Inc. (NASDAQ:RVSB). Elizabeth Park Capital Management had $1.7 million invested in the company at the end of the quarter. Paul Magidson, Jonathan Cohen. And Ostrom Enders’s Castine Capital Management also initiated a $0.4 million position during the quarter. The following funds were also among the new RVSB investors: Ken Griffin’s Citadel Investment Group and Peter Algert and Kevin Coldiron’s Algert Coldiron Investors.
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Riverview Bancorp, Inc. (NASDAQ:RVSB) but similarly valued. We will take a look at Era Group Inc (NYSE:ERA), Provident Financial Holdings, Inc. (NASDAQ:PROV), OP Bancorp (NASDAQ:OPBK), and Olympic Steel, Inc. (NASDAQ:ZEUS). This group of stocks’ market values resemble RVSB’s market value.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
View table here if you experience formatting issues.
As you can see these stocks had an average of 5 hedge funds with bullish positions and the average amount invested in these stocks was $8 million. That figure was $6 million in RVSB’s case. Era Group Inc (NYSE:ERA) is the most popular stock in this table. On the other hand Provident Financial Holdings, Inc. (NASDAQ:PROV) is the least popular one with only 2 bullish hedge fund positions. Compared to these stocks Riverview Bancorp, Inc. (NASDAQ:RVSB) 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 12.3% in 2020 through June 30th and still beat the market by 15.5 percentage points. Unfortunately RVSB wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on RVSB were disappointed as the stock returned 14% during the second 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.
Disclosure: None. This article was originally published at Insider Monkey.