Is BankFinancial Corporation (BFIN) Going to Burn These Hedge Funds?

You probably know from experience that there is not as much information on small-cap companies as there is on large companies. Of course, this makes it really hard and difficult for individual investors to make a proper and accurate analysis of certain small-cap companies. However, well-known and successful hedge fund investors like Carl Icahn and George Soros hold the necessary resources and abilities to conduct an extensive stock analysis on small-cap stocks, which enable them to make millions of dollars by identifying potential winners within the small-cap galaxy of stocks. This represents the main reason why Insider Monkey takes notice of the hedge fund activity in these overlooked stocks.

BankFinancial Corporation (NASDAQ:BFIN) has experienced an increase in support from the world’s most elite money managers lately. BankFinancial Corporation (NASDAQ:BFIN) was in 4 hedge funds’ portfolios at the end of September. There were 3 hedge funds in our database with BankFinancial Corporation (NASDAQ:BFIN) holdings at the end of the previous quarter. The stock market perfromance of BankFinancial Corporation (NASDAQ:BFIN) follows the hedge fund behavior, with its stock improving 5.52% throughout the quarter.

For an in-depth understanding of the stock market sentiment, we will also compare BankFinancial Corporation (NASDAQ:BFIN) to other stocks, including Real Industry Inc (NASDAQ:RELY), Hooker Furniture Corporation (NASDAQ:HOFT), and Reis Inc (NASDAQ:REIS) to get a better sense of its popularity.

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If you’d ask most shareholders, hedge funds are viewed as underperforming, outdated financial tools of yesteryear. While there are greater than 8000 funds trading at the moment, our experts look at the top tier of this club, about 700 funds. These hedge fund managers preside over most of the hedge fund industry’s total capital, and by observing their unrivaled equity investments, Insider Monkey has spotted several investment strategies that have historically outperformed the market. Insider Monkey’s small-cap hedge fund strategy outrun the S&P 500 index by 12 percentage points per year for a decade in their back tests.

Keeping this in mind, let’s take a glance at the recent action encompassing BankFinancial Corporation (NASDAQ:BFIN).

What does the smart money think about BankFinancial Corporation (NASDAQ:BFIN)?

At the end of the third quarter, a total of 4 of the hedge funds tracked by Insider Monkey were long this stock, an increase of 33% from one quarter earlier. With hedgies’ sentiment swirling, there exists an “upper tier” of key hedge fund managers who were increasing their holdings meaningfully (or already accumulated large positions).

According to Insider Monkey’s hedge fund database, Basswood Capital, managed by Matthew Lindenbaum, holds the number one position in BankFinancial Corporation (NASDAQ:BFIN). Basswood Capital has a $25.4 million position in the stock, comprising 1.3% of its 13F portfolio. The second largest stake is held by Renaissance Technologies, with a $4.9 million position; the fund has less than 0.1% of its 13F portfolio invested in the stock. Some other peers with similar optimism contain Porter Collins, Daniel Moses, and Vincent Daniel’s Seawolf Capital, and Israel Englander’s Millennium Management.

Consequently, key hedge funds were breaking ground themselves. Seawolf Capital assembled the largest position in BankFinancial Corporation (NASDAQ:BFIN). Seawolf Capital had $4.3 million invested in the company at the end of the quarter. Millennium Management also made a $0.2 million investment in the stock during the quarter.

Let’s also examine hedge fund activity in other stocks similar to BankFinancial Corporation (NASDAQ:BFIN). We will take a look at Real Industry Inc (NASDAQ:RELY), Hooker Furniture Corporation (NASDAQ:HOFT), Reis Inc (NASDAQ:REIS), and American Science & Engineering, Inc. (NASDAQ:ASEI). This group of stocks’ market caps match BankFinancial Corporation (NASDAQ:BFIN)’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
RELY 9 25280 0
HOFT 10 30130 -2
REIS 9 32097 1
ASEI 9 31319 -2

As you can see, these stocks had an average of 9 hedge funds with bullish positions and the average amount invested in these stocks was $30 million. That figure was $35 million in BankFinancial Corporation (NASDAQ:BFIN)’s case. Hooker Furniture Corporation (NASDAQ:HOFT) is the most popular stock in this table. On the other hand, Real Industry Inc (NASDAQ:RELY) is the least popular one with only 9 bullish hedge fund positions. Compared to these stocks, BankFinancial Corporation (NASDAQ:BFIN) is even less popular than Real Industry Inc (NASDAQ:RELY). Considering that hedge funds aren’t fond of this stock in relation to other companies analyzed in this article, it may be a good idea to analyze it in detail and understand why the smart money isn’t behind this stock. This isn’t necessarily bad news. Although it is possible that hedge funds may think the stock is overpriced and view the stock as a short candidate, they may not be very familiar with the bullish thesis. In either case, more research is warranted.