Investing in small cap stocks has historically been a way to outperform the market, as small cap companies typically grow faster on average than the blue chips. That outperformance comes with a price, however, as there are occasional periods of higher volatility. The fourth quarter of 2018 is one of those periods, as the Russell 2000 ETF (IWM) has underperformed the larger S&P 500 ETF (SPY) by nearly 7 percentage points. Given that the funds we track tend to have a disproportionate amount of their portfolios in smaller cap stocks, they have seen some volatility in their portfolios too. Actually their moves are potentially one of the factors that contributed to this volatility. In this article, we use our extensive database of hedge fund holdings to find out what the smart money thinks of Eagle Bancorp, Inc. (NASDAQ:EGBN).
Eagle Bancorp, Inc. (NASDAQ:EGBN) has seen a decrease in support from the world’s most elite money managers lately. EGBN was in 12 hedge funds’ portfolios at the end of December. There were 19 hedge funds in our database with EGBN positions at the end of the previous quarter. Our calculations also showed that EGBN isn’t among the 30 most popular stocks among hedge funds.
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s flagship best performing hedge funds strategy returned 20.7% year to date (through March 12th) and outperformed the market even though it draws its stock picks among small-cap stocks. This strategy also outperformed the market by 32 percentage points since its inception (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
We’re going to take a look at the fresh hedge fund action surrounding Eagle Bancorp, Inc. (NASDAQ:EGBN).
How are hedge funds trading Eagle Bancorp, Inc. (NASDAQ:EGBN)?
Heading into the first quarter of 2019, a total of 12 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -37% from the second quarter of 2018. By comparison, 14 hedge funds held shares or bullish call options in EGBN a year ago. With hedgies’ positions undergoing their usual ebb and flow, there exists an “upper tier” of key hedge fund managers who were upping their holdings significantly (or already accumulated large positions).
The largest stake in Eagle Bancorp, Inc. (NASDAQ:EGBN) was held by Renaissance Technologies, which reported holding $8 million worth of stock at the end of December. It was followed by GAMCO Investors with a $4.9 million position. Other investors bullish on the company included Fisher Asset Management, Basswood Capital, and Millennium Management.
Due to the fact that Eagle Bancorp, Inc. (NASDAQ:EGBN) has experienced a decline in interest from the entirety of the hedge funds we track, logic holds that there exists a select few hedge funds who were dropping their full holdings last quarter. Interestingly, Paul Magidson, Jonathan Cohen. And Ostrom Enders’s Castine Capital Management sold off the biggest position of the 700 funds watched by Insider Monkey, valued at close to $4.1 million in stock, and Paul Marshall and Ian Wace’s Marshall Wace LLP was right behind this move, as the fund sold off about $2.5 million worth. These transactions are intriguing to say the least, as aggregate hedge fund interest fell by 7 funds last quarter.
Let’s check out hedge fund activity in other stocks similar to Eagle Bancorp, Inc. (NASDAQ:EGBN). We will take a look at Tellurian Inc. (NASDAQ:TELL), Reata Pharmaceuticals, Inc. (NASDAQ:RETA), Baozun Inc (NASDAQ:BZUN), and Stepan Company (NYSE:SCL). This group of stocks’ market valuations are similar to EGBN’s market valuation.
|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 14.5 hedge funds with bullish positions and the average amount invested in these stocks was $83 million. That figure was $22 million in EGBN’s case. Reata Pharmaceuticals, Inc. (NASDAQ:RETA) is the most popular stock in this table. On the other hand Stepan Company (NYSE:SCL) is the least popular one with only 12 bullish hedge fund positions. Compared to these stocks Eagle Bancorp, Inc. (NASDAQ:EGBN) is even less popular than SCL. Hedge funds dodged a bullet by taking a bearish stance towards EGBN. Our calculations showed that the top 15 most popular hedge fund stocks returned 24.2% through April 22nd and outperformed the S&P 500 ETF (SPY) by more than 7 percentage points. Unfortunately EGBN wasn’t nearly as popular as these 15 stock (hedge fund sentiment was very bearish); EGBN investors were disappointed as the stock returned 10.2% and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 15 most popular stocks) among hedge funds as 13 of these stocks already outperformed the market this year.
Disclosure: None. This article was originally published at Insider Monkey.