It seems that the masses and most of the financial media hate hedge funds and what they do, but why is this hatred of hedge funds so prominent? At the end of the day, these asset management firms do not gamble the hard-earned money of the people who are on the edge of poverty. Truth be told, most hedge fund managers and other smaller players within this industry are very smart and skilled investors. Of course, they may also make wrong bets in some instances, but no one knows what the future holds and how market participants will react to the bountiful news that floods in each day. The Standard and Poor’s 500 Index returned approximately 13.1% in the first 2.5 months of this year (including dividend payments). Conversely, hedge funds’ top 15 large-cap stock picks generated a return of 19.7% during the same 2.5-month period, with 93% of these stock picks outperforming the broader market benchmark. Coincidence? It might happen to be so, but it is unlikely. Our research covering the last 18 years indicates that hedge funds’ stock picks generate superior risk-adjusted returns. That’s why we believe it isn’t a waste of time to check out hedge fund sentiment before you invest in a stock like Bank of Hawaii Corporation (NYSE:BOH).
Is Bank of Hawaii Corporation (NYSE:BOH) the right investment to pursue these days? The best stock pickers are taking a bullish view. The number of bullish hedge fund positions improved by 1 recently. Our calculations also showed that BOH isn’t among the 30 most popular stocks among hedge funds.
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’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the market by 32 percentage points since May 2014 through March 12, 2019 (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 27.5% through March 12, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Let’s view the latest hedge fund action surrounding Bank of Hawaii Corporation (NYSE:BOH).
How have hedgies been trading Bank of Hawaii Corporation (NYSE:BOH)?
Heading into the first quarter of 2019, a total of 13 of the hedge funds tracked by Insider Monkey were long this stock, a change of 8% from one quarter earlier. By comparison, 8 hedge funds held shares or bullish call options in BOH a year ago. With hedgies’ capital changing hands, there exists a few key hedge fund managers who were increasing their stakes substantially (or already accumulated large positions).
More specifically, Renaissance Technologies was the largest shareholder of Bank of Hawaii Corporation (NYSE:BOH), with a stake worth $31.7 million reported as of the end of September. Trailing Renaissance Technologies was Balyasny Asset Management, which amassed a stake valued at $27.8 million. Royce & Associates, Citadel Investment Group, and AQR Capital Management were also very fond of the stock, giving the stock large weights in their portfolios.
Consequently, key hedge funds were breaking ground themselves. Interval Partners, managed by Gregg Moskowitz, initiated the biggest position in Bank of Hawaii Corporation (NYSE:BOH). Interval Partners had $1 million invested in the company at the end of the quarter. D. E. Shaw’s D E Shaw also made a $0.6 million investment in the stock during the quarter. The other funds with new positions in the stock are Matthew Hulsizer’s PEAK6 Capital Management and Andrew Feldstein and Stephen Siderow’s Blue Mountain Capital.
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Bank of Hawaii Corporation (NYSE:BOH) but similarly valued. These stocks are Eldorado Resorts Inc (NASDAQ:ERI), Magnolia Oil & Gas Corporation (NYSE:MGY), The Boston Beer Company Inc (NYSE:SAM), and Avista Corp (NYSE:AVA). All of these stocks’ market caps resemble BOH’s market cap.
|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 24.5 hedge funds with bullish positions and the average amount invested in these stocks was $322 million. That figure was $102 million in BOH’s case. Magnolia Oil & Gas Corporation (NYSE:MGY) is the most popular stock in this table. On the other hand Avista Corp (NYSE:AVA) is the least popular one with only 18 bullish hedge fund positions. Compared to these stocks Bank of Hawaii Corporation (NYSE:BOH) is even less popular than AVA. Our calculations showed that top 15 most popular stocks) among hedge funds returned 24.2% through April 22nd and outperformed the S&P 500 ETF (SPY) by more than 7 percentage points. A small number of hedge funds were also right about betting on BOH, though not to the same extent, as the stock returned 21.7% and outperformed the market as well.
Disclosure: None. This article was originally published at Insider Monkey.