We have been waiting for this for a year and finally the third quarter ended up showing a nice bump in the performance of small-cap stocks. Both the S&P 500 and Russell 2000 were up since the end of the second quarter, but small-cap stocks outperformed the large-cap stocks by double digits. This is important for hedge funds, which are big supporters of small-cap stocks, because their investors started pulling some of their capital out due to poor recent performance. It is very likely that equity hedge funds will deliver better risk adjusted returns in the second half of this year. In this article we are going to look at how this recent market trend affected the sentiment of hedge funds towards Carolina Bank Holding Inc. (NC) (NASDAQ:CLBH), and what that likely means for the prospects of the company and its stock.
Carolina Bank Holding Inc. (NC) (NASDAQ:CLBH) has seen an increase in hedge fund sentiment in recent months. There were 5 hedge funds in our database with CLBH holdings at the end of the previous quarter. 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 Aldeyra Therapeutics Inc (NASDAQ:ALDX), StarTek, Inc. (NYSE:SRT), and Atlantic Coast Financial Corp (NASDAQ:ACFC) to gather more data points.
We care about hedge fund sentiment because historically hedge funds’ stock picks delivered strong risk adjusted returns. There are certain segments of the market where hedge funds’ stock picks performed much better than its benchmarks. For instance, the 30 most popular mid-cap stocks among the best performing hedge funds returned 18% over the last 12 months outpacing S&P 500 Index by more than 10 percentage points. We developed this strategy 2.5 years ago and started sharing its picks in our quarterly newsletter. It bested the S&P 500 Index ETFs by delivering a solid 39% vs. 22% gain for its benchmarks.
Keeping this in mind, let’s go over the key action encompassing Carolina Bank Holding Inc. (NC) (NASDAQ:CLBH).
How are hedge funds trading Carolina Bank Holding Inc. (NC) (NASDAQ:CLBH)?
Heading into the fourth quarter of 2016, a total of 6 of the hedge funds tracked by Insider Monkey held long positions in this stock, a jump of 20% from one quarter earlier. By comparison, 4 hedge funds held shares or bullish call options in CLBH heading into this year. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
When looking at the institutional investors followed by Insider Monkey, Robert I. Usdan and Wayne K. Goldstein’s Endicott Management has the biggest position in Carolina Bank Holding Inc. (NC) (NASDAQ:CLBH), worth close to $5 million, comprising 2.2% of its total 13F portfolio. The second most bullish fund manager is Basswood Capital, led by Matthew Lindenbaum, which holds a $2.9 million position; 0.1% of its 13F portfolio is allocated to the stock. Other professional money managers that hold long positions consist of Joe Huber’s Huber Capital Management, Paul Tudor Jones’ Tudor Investment Corp and Renaissance Technologies, one of the largest hedge funds in the world. We should note that none of these hedge funds are among our list of the 100 best performing hedge funds which is based on the performance of their 13F long positions in non-microcap stocks.
As industrywide interest jumped, specific money managers have jumped into Carolina Bank Holding Inc. (NC) (NASDAQ:CLBH) headfirst. Tudor Investment Corp initiated the biggest position in Carolina Bank Holding Inc. (NC) (NASDAQ:CLBH). According to regulatory filings, the fund had $0.8 million invested in the company at the end of the quarter. Jim Simons’ Renaissance Technologies also initiated a $0.4 million position during the quarter.
Let’s also examine hedge fund activity in other stocks similar to Carolina Bank Holding Inc. (NC) (NASDAQ:CLBH). These stocks are Aldeyra Therapeutics Inc (NASDAQ:ALDX), StarTek, Inc. (NYSE:SRT), Atlantic Coast Financial Corp (NASDAQ:ACFC), and NanoViricides Inc (NYSEMKT:NNVC). All of these stocks’ market caps are similar to CLBH’s market cap.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
As you can see these stocks had an average of 3 hedge funds with bullish positions and the average amount invested in these stocks was $10 million. That figure was $10 million in CLBH’s case. Aldeyra Therapeutics Inc (NASDAQ:ALDX) is the most popular stock in this table. On the other hand NanoViricides Inc (NYSEMKT:NNVC) is the least popular one with only 1 bullish hedge fund positions. Compared to these stocks Carolina Bank Holding Inc. (NC) (NASDAQ:CLBH) is more popular among hedge funds. Considering that hedge funds are fond of this stock in relation to its market cap peers, it may be a good idea to analyze it in detail and potentially include it in your portfolio.