Is Eagle Bancorp Montana Inc (EBMT) Going to Burn These Hedge Funds?

At the end of February we announced the arrival of the first US recession since 2009 and we predicted that the market will decline by at least 20% in (Recession is Imminent: We Need A Travel Ban NOW). In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. In this article, we will take a closer look at hedge fund sentiment towards Eagle Bancorp Montana Inc (NASDAQ:EBMT).

Eagle Bancorp Montana Inc (NASDAQ:EBMT) has seen a decrease in enthusiasm from smart money in recent months. EBMT was in 7 hedge funds’ portfolios at the end of March. There were 8 hedge funds in our database with EBMT holdings at the end of the previous quarter. Our calculations also showed that EBMT isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks).

Video: Watch our video about the top 5 most popular hedge fund stocks.

At the moment there are a multitude of indicators stock market investors put to use to analyze publicly traded companies. A couple of the most under-the-radar indicators are hedge fund and insider trading indicators. Our researchers have shown that, historically, those who follow the top picks of the top investment managers can trounce the market by a very impressive margin (see the details here).


Israel Englander of Millennium Management

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, 2020’s unprecedented market conditions provide us with the highest number of trading opportunities in a decade. So we are checking out stocks recommended/scorned by legendary Bill Miller. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Now we’re going to take a look at the latest hedge fund action surrounding Eagle Bancorp Montana Inc (NASDAQ:EBMT).

How are hedge funds trading Eagle Bancorp Montana Inc (NASDAQ:EBMT)?

At the end of the first quarter, a total of 7 of the hedge funds tracked by Insider Monkey were long this stock, a change of -13% from one quarter earlier. On the other hand, there were a total of 3 hedge funds with a bullish position in EBMT a year ago. With the smart money’s capital changing hands, there exists a select group of noteworthy hedge fund managers who were increasing their stakes substantially (or already accumulated large positions).

Is EBMT A Good Stock To Buy?

More specifically, EJF Capital was the largest shareholder of Eagle Bancorp Montana Inc (NASDAQ:EBMT), with a stake worth $5.7 million reported as of the end of September. Trailing EJF Capital was Fourthstone LLC, which amassed a stake valued at $2.3 million. Castine Capital Management, Renaissance Technologies, 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 Fourthstone LLC allocated the biggest weight to Eagle Bancorp Montana Inc (NASDAQ:EBMT), around 2.12% of its 13F portfolio. EJF Capital is also relatively very bullish on the stock, earmarking 1.2 percent of its 13F equity portfolio to EBMT.

Judging by the fact that Eagle Bancorp Montana Inc (NASDAQ:EBMT) has witnessed a decline in interest from the smart money, we can see that there was a specific group of funds that decided to sell off their entire stakes last quarter. It’s worth mentioning that Michael Gelband’s ExodusPoint Capital cut the biggest position of the 750 funds tracked by Insider Monkey, valued at an estimated $0.3 million in stock, and David Nguyen and Nancy Oh’s One68 Global Capital was right behind this move, as the fund cut about $0.2 million worth. These moves are interesting, as aggregate hedge fund interest fell by 1 funds last quarter.

Let’s also examine hedge fund activity in other stocks similar to Eagle Bancorp Montana Inc (NASDAQ:EBMT). These stocks are Orion Energy Systems, Inc. (NYSE:OESX), First Western Financial, Inc. (NASDAQ:MYFW), Mackinac Financial Corporation (NASDAQ:MFNC), and Anworth Mortgage Asset Corporation (NYSE:ANH). This group of stocks’ market caps are similar to EBMT’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
OESX 8 12154 0
MYFW 5 7992 0
MFNC 5 8683 1
ANH 10 12358 -4
Average 7 10297 -0.75

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 $10 million. That figure was $13 million in EBMT’s case. Anworth Mortgage Asset Corporation (NYSE:ANH) is the most popular stock in this table. On the other hand First Western Financial, Inc. (NASDAQ:MYFW) is the least popular one with only 5 bullish hedge fund positions. Eagle Bancorp Montana Inc (NASDAQ:EBMT) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 13.9% in 2020 through June 10th and surpassed the market by 14.2 percentage points. Unfortunately EBMT wasn’t nearly as popular as these 10 stocks (hedge fund sentiment was quite bearish); EBMT investors were disappointed as the stock returned 15.4% during the second quarter and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.

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Disclosure: None. This article was originally published at Insider Monkey.