Is ESSA Bancorp, Inc. (ESSA) A Good Stock To Buy Now?

The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We have processed the filings of the more than 817 world-class investment firms that we track and now have access to the collective wisdom contained in these filings, which are based on their September 30 holdings, data that is available nowhere else. Should you consider ESSA Bancorp, Inc. (NASDAQ:ESSA) for your portfolio? We’ll look to this invaluable collective wisdom for the answer.

Is ESSA Bancorp, Inc. (NASDAQ:ESSA) an excellent investment now? Investors who are in the know were becoming hopeful. The number of long hedge fund positions went up by 1 in recent months. ESSA Bancorp, Inc. (NASDAQ:ESSA) was in 3 hedge funds’ portfolios at the end of September. The all time high for this statistics is 6. Our calculations also showed that ESSA 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).

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

In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s monthly stock picks returned 113% since March 2017 and outperformed the S&P 500 ETFs by more than 66 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

Jeffrey Gendell of Tontine Asset Management

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 10 most profitable companies in the world 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. Keeping this in mind let’s take a peek at the latest hedge fund action regarding ESSA Bancorp, Inc. (NASDAQ:ESSA).

What have hedge funds been doing with ESSA Bancorp, Inc. (NASDAQ:ESSA)?

At the end of September, a total of 3 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 50% from the second quarter of 2020. By comparison, 2 hedge funds held shares or bullish call options in ESSA a year ago. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

More specifically, Renaissance Technologies was the largest shareholder of ESSA Bancorp, Inc. (NASDAQ:ESSA), with a stake worth $6 million reported as of the end of September. Trailing Renaissance Technologies was Tontine Asset Management, which amassed a stake valued at $2.6 million. Zebra Capital Management was 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 Tontine Asset Management allocated the biggest weight to ESSA Bancorp, Inc. (NASDAQ:ESSA), around 0.54% of its 13F portfolio. Zebra Capital Management is also relatively very bullish on the stock, designating 0.37 percent of its 13F equity portfolio to ESSA.

As industrywide interest jumped, some big names have jumped into ESSA Bancorp, Inc. (NASDAQ:ESSA) headfirst. Zebra Capital Management, managed by Roger Ibbotson, initiated the biggest position in ESSA Bancorp, Inc. (NASDAQ:ESSA). Zebra Capital Management had $0.2 million invested in the company at the end of the quarter.

Let’s also examine hedge fund activity in other stocks similar to ESSA Bancorp, Inc. (NASDAQ:ESSA). These stocks are FVCBankcorp, Inc. (NASDAQ:FVCB), Leaf Group Ltd (NYSE:LEAF), Contura Energy, Inc. (NYSE:CTRA), DIRTT Environmental Solutions Ltd. (NASDAQ:DRTT), GSI Technology, Inc. (NASDAQ:GSIT), Nano Dimension Ltd. (NASDAQ:NNDM), and Bel Fuse, Inc. (NASDAQ:BELFB). This group of stocks’ market caps are closest to ESSA’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
FVCB 3 3495 -1
LEAF 10 26521 -1
CTRA 18 46876 -1
DRTT 8 24577 -1
GSIT 4 12757 -1
NNDM 2 172 1
BELFB 7 11262 -1
Average 7.4 17951 -0.7

View table here if you experience formatting issues.

As you can see these stocks had an average of 7.4 hedge funds with bullish positions and the average amount invested in these stocks was $18 million. That figure was $9 million in ESSA’s case. Contura Energy, Inc. (NYSE:CTRA) is the most popular stock in this table. On the other hand Nano Dimension Ltd. (NASDAQ:NNDM) is the least popular one with only 2 bullish hedge fund positions. ESSA Bancorp, Inc. (NASDAQ:ESSA) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for ESSA is 24.1. 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 28.1% in 2020 through November 23rd and still beat the market by 15.4 percentage points. A small number of hedge funds were also right about betting on ESSA as the stock returned 19.8% since the end of the third quarter (through 11/23) and outperformed the market by an even larger margin.

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