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Hedge Funds Watching Territorial Bancorp Inc (TBNK) From Afar

In this article you are going to find out whether hedge funds think Territorial Bancorp Inc (NASDAQ:TBNK) is a good investment right now. We like to check what the smart money thinks first before doing extensive research on a given stock. Although there have been several high profile failed hedge fund picks, the consensus picks among hedge fund investors have historically outperformed the market after adjusting for known risk attributes. It’s not surprising given that hedge funds have access to better information and more resources to predict the winners in the stock market.

Hedge fund interest in Territorial Bancorp Inc (NASDAQ:TBNK) 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 Motorcar Parts of America, Inc. (NASDAQ:MPAA), Majesco (NASDAQ:MJCO), and Geron Corporation (NASDAQ:GERN) to gather more data points. Our calculations also showed that TBNK 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).

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

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 44 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’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 36% through May 18th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

John Overdeck of Two Sigma

John Overdeck of Two Sigma Advisors

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, legendary investor Bill Miller told investors to sell 7 extremely popular recession stocks last month. So, we went through his list and recommended another stock with 100% upside potential instead. 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 S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind we’re going to check out the latest hedge fund action encompassing Territorial Bancorp Inc (NASDAQ:TBNK).

How have hedgies been trading Territorial Bancorp Inc (NASDAQ:TBNK)?

Heading into the second quarter of 2020, a total of 4 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 0% from the fourth quarter of 2019. By comparison, 3 hedge funds held shares or bullish call options in TBNK a year ago. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Renaissance Technologies has the most valuable position in Territorial Bancorp Inc (NASDAQ:TBNK), worth close to $16.4 million, corresponding to less than 0.1%% of its total 13F portfolio. The second largest stake is held by Royce & Associates, managed by Chuck Royce, which holds a $3.2 million position; less than 0.1%% of its 13F portfolio is allocated to the company. Other peers that hold long positions comprise David Harding’s Winton Capital Management, John Overdeck and David Siegel’s Two Sigma Advisors and . In terms of the portfolio weights assigned to each position Royce & Associates allocated the biggest weight to Territorial Bancorp Inc (NASDAQ:TBNK), around 0.04% of its 13F portfolio. Renaissance Technologies is also relatively very bullish on the stock, dishing out 0.02 percent of its 13F equity portfolio to TBNK.

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 third 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 – not necessarily in the same industry as Territorial Bancorp Inc (NASDAQ:TBNK) but similarly valued. We will take a look at Motorcar Parts of America, Inc. (NASDAQ:MPAA), Majesco (NASDAQ:MJCO), Geron Corporation (NASDAQ:GERN), and Investors Title Company (NASDAQ:ITIC). All of these stocks’ market caps are similar to TBNK’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
MPAA 6 44768 1
MJCO 1 63 0
GERN 3 1186 -1
ITIC 5 31169 1
Average 3.75 19297 0.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 3.75 hedge funds with bullish positions and the average amount invested in these stocks was $19 million. That figure was $20 million in TBNK’s case. Motorcar Parts of America, Inc. (NASDAQ:MPAA) is the most popular stock in this table. On the other hand Majesco (NASDAQ:MJCO) is the least popular one with only 1 bullish hedge fund positions. Territorial Bancorp Inc (NASDAQ:TBNK) 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 8.3% in 2020 through the end of May but beat the market by 13.2 percentage points. Unfortunately TBNK wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on TBNK were disappointed as the stock returned 4.6% 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.

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