Is Heritage Commerce Corp. (HTBK) Worthy of Your Portfolio?

We view hedge fund activity in the stock unfavorable, but in this case there was only a single hedge fund selling its entire position: Consector Capital. 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 700+ hedge funds tracked by Insider Monkey identified HTBK as a viable investment and initiated a position in the stock.

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Heritage Commerce Corp. (NASDAQ:HTBK) but similarly valued. These stocks are Trevena Inc (NASDAQ:TRVN), Covenant Transportation Group, Inc. (NASDAQ:CVTI), NQ Mobile Inc (ADR) (NYSE:NQ), and Park Electrochemical Corp. (NYSE:PKE). This group of stocks’ market caps match HTBK’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
TRVN 10 32645 0
CVTI 8 18452 3
NQ 8 10417 1
PKE 7 80580 0

As you can see these stocks had an average of eight funds with bullish positions and the average amount invested in these stocks was $36 million. That figure was $12 million in HTBK’s case. Trevena Inc (NASDAQ:TRVN) is the most popular stock in this table. On the other hand Park Electrochemical Corp. (NYSE:PKE) is the least popular one with only seven bullish hedge fund positions. Compared to these stocks Heritage Commerce Corp. (NASDAQ:HTBK) registered the same level of popularity as PKE. 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.

Disclosure: none