Hedge Funds Sticking With Pacific Mercantile Bancorp (PMBC)

The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We at Insider Monkey have plowed through 821 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds’ and investors’ portfolio positions as of March 31st, a week after the market trough. In this article we look at what those investors think of Pacific Mercantile Bancorp (NASDAQ:PMBC).

Pacific Mercantile Bancorp (NASDAQ:PMBC) shares haven’t seen a lot of action during the first quarter. Overall, hedge fund sentiment was unchanged. The stock was in 5 hedge funds’ portfolios at the end of March. At the end of this article we will also compare PMBC to other stocks including Acacia Research Corporation (NASDAQ:ACTG), Solid Biosciences Inc. (NASDAQ:SLDB), and Red Robin Gourmet Burgers, Inc. (NASDAQ:RRGB) to get a better sense of its popularity.

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

At the moment there are plenty of gauges stock market investors use to assess their holdings. Two of the most underrated gauges are hedge fund and insider trading indicators. Our researchers have shown that, historically, those who follow the best picks of the top hedge fund managers can beat the broader indices by a very impressive amount (see the details here).


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. Keeping this in mind let’s take a look at the recent hedge fund action surrounding Pacific Mercantile Bancorp (NASDAQ:PMBC).

Hedge fund activity in Pacific Mercantile Bancorp (NASDAQ:PMBC)

Heading into the second quarter of 2020, a total of 5 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 0% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in PMBC over the last 18 quarters. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Of the funds tracked by Insider Monkey, Emanuel J. Friedman’s EJF Capital has the most valuable position in Pacific Mercantile Bancorp (NASDAQ:PMBC), worth close to $7.6 million, accounting for 1.6% of its total 13F portfolio. On EJF Capital’s heels is Renaissance Technologies, with a $3.8 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Other professional money managers that are bullish encompass Phil Stone’s Fourthstone LLC, Fred Cummings’s Elizabeth Park Capital Management and Ken Griffin’s Citadel Investment Group. In terms of the portfolio weights assigned to each position EJF Capital allocated the biggest weight to Pacific Mercantile Bancorp (NASDAQ:PMBC), around 1.59% of its 13F portfolio. Fourthstone LLC is also relatively very bullish on the stock, earmarking 1.53 percent of its 13F equity portfolio to PMBC.

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 now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Pacific Mercantile Bancorp (NASDAQ:PMBC) but similarly valued. We will take a look at Acacia Research Corporation (NASDAQ:ACTG), Solid Biosciences Inc. (NASDAQ:SLDB), Red Robin Gourmet Burgers, Inc. (NASDAQ:RRGB), and Community Bankers Trust Corp. (NASDAQ:ESXB). This group of stocks’ market values are closest to PMBC’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
ACTG 12 17488 0
SLDB 11 30585 0
RRGB 7 6166 -4
ESXB 7 14001 2
Average 9.25 17060 -0.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 9.25 hedge funds with bullish positions and the average amount invested in these stocks was $17 million. That figure was $14 million in PMBC’s case. Acacia Research Corporation (NASDAQ:ACTG) 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 7 bullish hedge fund positions. Compared to these stocks Pacific Mercantile Bancorp (NASDAQ:PMBC) is even less popular than RRGB. Hedge funds dodged a bullet by taking a bearish stance towards PMBC. Our calculations showed that the top 10 most popular hedge fund stocks returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 8.3% in 2020 through the end of May but managed to beat the market by 13.2 percentage points. Unfortunately PMBC wasn’t nearly as popular as these 10 stocks (hedge fund sentiment was very bearish); PMBC investors were disappointed as the stock returned -19.3% during the second quarter (through the end of May) 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 so far in 2020.

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