Is Hope Bancorp, Inc. (HOPE) Going to Burn These Hedge Funds?

During the first half of the fourth quarter the Russell 2000 ETF (IWM) lagged the larger S&P 500 ETF (SPY) by about 4 percentage points as investors worried over the possible ramifications of rising interest rates. The hedge funds and institutional investors we track typically invest more in smaller-cap stocks than an average investor (i.e. only 298 S&P 500 constituents were among the 500 most popular stocks among hedge funds), and we have seen data that shows those funds paring back their overall exposure. Those funds cutting positions in small-caps is one reason why volatility has increased. In the following paragraphs, we take a closer look at what hedge funds and prominent investors think of Hope Bancorp, Inc. (NASDAQ:HOPE) and see how the stock is affected by the recent hedge fund activity.

Is Hope Bancorp, Inc. (NASDAQ:HOPE) going to take off soon? The best stock pickers are in a bullish mood. The number of long hedge fund bets improved by 7 recently. Our calculations also showed that hope isn’t among the 30 most popular stocks among hedge funds.

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that hedge funds’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the market by 18 percentage points since May 2014 through December 3, 2018 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 24% through December 3, 2018. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Mario Gabelli

Let’s review the key hedge fund action regarding Hope Bancorp, Inc. (NASDAQ:HOPE).

How are hedge funds trading Hope Bancorp, Inc. (NASDAQ:HOPE)?

At the end of the third quarter, a total of 14 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 100% from one quarter earlier. On the other hand, there were a total of 13 hedge funds with a bullish position in HOPE at the beginning of this year. With hedgies’ positions undergoing their usual ebb and flow, there exists an “upper tier” of key hedge fund managers who were increasing their holdings substantially (or already accumulated large positions).

No of Hedge Funds with HOPE Positions

The largest stake in Hope Bancorp, Inc. (NASDAQ:HOPE) was held by Pzena Investment Management, which reported holding $48.4 million worth of stock at the end of September. It was followed by GAMCO Investors with a $9.5 million position. Other investors bullish on the company included Millennium Management, Marshall Wace LLP, and D E Shaw.

Now, specific money managers have been driving this bullishness. Millennium Management, managed by Israel Englander, created the most valuable position in Hope Bancorp, Inc. (NASDAQ:HOPE). Millennium Management had $6.6 million invested in the company at the end of the quarter. Paul Marshall and Ian Wace’s Marshall Wace LLP also made a $6.5 million investment in the stock during the quarter. The other funds with brand new HOPE positions are Dmitry Balyasny’s Balyasny Asset Management, Michael Platt and William Reeves’s BlueCrest Capital Mgmt., and Paul Tudor Jones’s Tudor Investment Corp.

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Hope Bancorp, Inc. (NASDAQ:HOPE) but similarly valued. We will take a look at KB Home (NYSE:KBH), Premier Financial Bancorp, Inc. (NASDAQ:PFBI), Genworth Financial Inc (NYSE:GNW), and Granite Construction Incorporated (NYSE:GVA). This group of stocks’ market valuations are similar to HOPE’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
KBH 17 331197 3
PFBI 4 15565 1
GNW 22 74106 0
GVA 16 86556 -1
Average 14.75 126856 0.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 14.75 hedge funds with bullish positions and the average amount invested in these stocks was $127 million. That figure was $82 million in HOPE’s case. Genworth Financial Inc (NYSE:GNW) is the most popular stock in this table. On the other hand Premier Financial Bancorp, Inc. (NASDAQ:PFBI) is the least popular one with only 4 bullish hedge fund positions. Hope Bancorp, Inc. (NASDAQ:HOPE) 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. In this regard GNW might be a better candidate to consider a long position.

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