In this article we will check out the progression of hedge fund sentiment towards Bank of Commerce Holdings (NASDAQ:BOCH) and determine whether it is a good investment right now. We at Insider Monkey like to examine what billionaires and hedge funds think of a company before spending days of research on it. Given their 2 and 20 payment structure, hedge funds have more incentives and resources than the average investor. The funds have access to expert networks and get tips from industry insiders. They also employ numerous Ivy League graduates and MBAs. Like everyone else, hedge funds perform miserably at times, but their consensus picks have historically outperformed the market after risk adjustments.
Is Bank of Commerce Holdings (NASDAQ:BOCH) a good stock to buy now? Investors who are in the know were cutting their exposure. The number of bullish hedge fund positions went down by 1 lately. Bank of Commerce Holdings (NASDAQ:BOCH) was in 5 hedge funds’ portfolios at the end of the third quarter of 2020. The all time high for this statistics is 7. Our calculations also showed that BOCH isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video for a quick look at the top 5 stocks). There were 6 hedge funds in our database with BOCH holdings at the end of June.
Video: Watch our video about the top 5 most popular hedge fund stocks.
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’ 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 S&P 500 ETFs by 66 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 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.
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 15 best blue chip stocks to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our website. Now we’re going to go over the key hedge fund action regarding Bank of Commerce Holdings (NASDAQ:BOCH).
What have hedge funds been doing with Bank of Commerce Holdings (NASDAQ:BOCH)?
At the end of the third quarter, a total of 5 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -17% from the previous quarter. By comparison, 5 hedge funds held shares or bullish call options in BOCH 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.
Among these funds, EJF Capital held the most valuable stake in Bank of Commerce Holdings (NASDAQ:BOCH), which was worth $5.6 million at the end of the third quarter. On the second spot was Renaissance Technologies which amassed $0.6 million worth of shares. Winton Capital Management, Bailard Inc, and Millennium Management were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position EJF Capital allocated the biggest weight to Bank of Commerce Holdings (NASDAQ:BOCH), around 0.47% of its 13F portfolio. Winton Capital Management is also relatively very bullish on the stock, setting aside 0.01 percent of its 13F equity portfolio to BOCH.
We view hedge fund activity in the stock unfavorable, but in this case there was only a single hedge fund selling its entire position: Zebra Capital 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 none of the 750+ hedge funds tracked by Insider Monkey identified BOCH as a viable investment and initiated a position in the stock.
Let’s now take a look at hedge fund activity in other stocks similar to Bank of Commerce Holdings (NASDAQ:BOCH). These stocks are Kirkland’s, Inc. (NASDAQ:KIRK), Pangaea Logistics Solutions, Ltd. (NASDAQ:PANL), Chico’s FAS, Inc. (NYSE:CHS), Republic First Bancorp, Inc. (NASDAQ:FRBK), Adamas Pharmaceuticals Inc (NASDAQ:ADMS), Remark Holdings, Inc. (NASDAQ:MARK), and Innovative Solutions & Support Inc (NASDAQ:ISSC). All of these stocks’ market caps are similar to BOCH’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 7 hedge funds with bullish positions and the average amount invested in these stocks was $13 million. That figure was $7 million in BOCH’s case. Chico’s FAS, Inc. (NYSE:CHS) is the most popular stock in this table. On the other hand Pangaea Logistics Solutions, Ltd. (NASDAQ:PANL) is the least popular one with only 1 bullish hedge fund positions. Bank of Commerce Holdings (NASDAQ:BOCH) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for BOCH is 43.6. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 30.7% in 2020 through November 27th and still beat the market by 16.1 percentage points. A small number of hedge funds were also right about betting on BOCH as the stock returned 37% since the end of the third quarter (through 11/27) and outperformed the market by an even larger margin.
Disclosure: None. This article was originally published at Insider Monkey.