Hedge Funds Have Never Been More Bullish On RBB Bancorp (RBB)

Before we spend countless hours researching a company, we like to analyze what insiders, hedge funds and billionaire investors think of the stock first. This is a necessary first step in our investment process because our research has shown that the elite investors’ consensus returns have been exceptional. In the following paragraphs, we find out what the billionaire investors and hedge funds think of RBB Bancorp (NASDAQ:RBB).

Hedge fund interest in RBB Bancorp (NASDAQ:RBB) shares was flat at the end of last quarter. This is usually a negative indicator. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Red Robin Gourmet Burgers, Inc. (NASDAQ:RRGB), Chico’s FAS, Inc. (NYSE:CHS), and Computer Programs & Systems, Inc. (NASDAQ:CPSI) to gather more data points. Our calculations also showed that RBB isn’t among the 30 most popular stocks among hedge funds (see the video below).
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

So, why do we pay attention to hedge fund sentiment before making any investment decisions? 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 market by 40 percentage points since May 2014 through May 30, 2019 (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. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in our short portfolio.

Matthew Lindenbaum Basswood Capital

Unlike former hedge manager, Dr. Steve Sjuggerud, who is convinced Dow will soar past 40000, our long-short investment strategy doesn’t rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. Let’s check out the key hedge fund action regarding RBB Bancorp (NASDAQ:RBB).

What have hedge funds been doing with RBB Bancorp (NASDAQ:RBB)?

At Q2’s end, a total of 5 of the hedge funds tracked by Insider Monkey were long this stock, a change of 0% from the first quarter of 2019. Below, you can check out the change in hedge fund sentiment towards RBB over the last 16 quarters. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

No of Hedge Funds with RBB Positions

The largest stake in RBB Bancorp (NASDAQ:RBB) was held by Basswood Capital, which reported holding $6.1 million worth of stock at the end of March. It was followed by Polaris Capital Management with a $2.9 million position. Other investors bullish on the company included Renaissance Technologies, Citadel Investment Group, and Royce & Associates.

Earlier we told you that the aggregate hedge fund interest in the stock was unchanged and we view this as a negative development. Even though there weren’t any hedge funds dumping their holdings during the second quarter, there weren’t any hedge funds initiating brand new positions. This indicates that hedge funds, at the very best, perceive this stock as dead money and they haven’t identified any viable catalysts that can attract investor attention.

Let’s go over hedge fund activity in other stocks similar to RBB Bancorp (NASDAQ:RBB). We will take a look at Red Robin Gourmet Burgers, Inc. (NASDAQ:RRGB), Chico’s FAS, Inc. (NYSE:CHS), Computer Programs & Systems, Inc. (NASDAQ:CPSI), and Regalwood Global Energy Ltd. (NYSE:RWGE). All of these stocks’ market caps resemble RBB’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
RRGB 12 31975 -3
CHS 13 41230 -2
CPSI 12 28331 -6
RWGE 14 120281 0
Average 12.75 55454 -2.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 12.75 hedge funds with bullish positions and the average amount invested in these stocks was $55 million. That figure was $10 million in RBB’s case. Regalwood Global Energy Ltd. (NYSE:RWGE) is the most popular stock in this table. On the other hand Red Robin Gourmet Burgers, Inc. (NASDAQ:RRGB) is the least popular one with only 12 bullish hedge fund positions. Compared to these stocks RBB Bancorp (NASDAQ:RBB) is even less popular than RRGB. Our calculations showed that top 20 most popular stocks among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. A small number of hedge funds were also right about betting on RBB, though not to the same extent, as the stock returned 2.3% during the third quarter and outperformed the market as well.

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