In this article we will take a look at whether hedge funds think Timberland Bancorp, Inc. (NASDAQ:TSBK) is a good investment right now. We check hedge fund and billionaire investor sentiment before delving into hours of research. Hedge funds spend millions of dollars on Ivy League graduates, unconventional data sources, expert networks, and get tips from investment bankers and industry insiders. Sure they sometimes fail miserably, but their consensus stock picks historically outperformed the market after adjusting for known risk factors.
Timberland Bancorp, Inc. (NASDAQ:TSBK) was in 3 hedge funds’ portfolios at the end of the first quarter of 2020. TSBK shareholders have witnessed a decrease in support from the world’s most elite money managers in recent months. There were 5 hedge funds in our database with TSBK positions at the end of the previous quarter. Our calculations also showed that TSBK 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.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 44 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, legendary investor Bill Miller told investors to sell 7 extremely popular recession stocks last month. So, we went through his list and recommended another stock with 100% upside potential instead. We interview hedge fund managers and ask them about their best ideas. You can watch our latest hedge fund manager interview here and find out the name of the large-cap healthcare stock that Sio Capital’s Michael Castor expects to double. 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 S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind let’s analyze the recent hedge fund action encompassing Timberland Bancorp, Inc. (NASDAQ:TSBK).
What does smart money think about Timberland Bancorp, Inc. (NASDAQ:TSBK)?
At Q1’s end, a total of 3 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -40% from the previous quarter. By comparison, 4 hedge funds held shares or bullish call options in TSBK a year ago. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Timberland Bancorp, Inc. (NASDAQ:TSBK) was held by Royce & Associates, which reported holding $12 million worth of stock at the end of September. It was followed by Renaissance Technologies with a $7.3 million position. The only other hedge fund that is bullish on the company was Basswood Capital.
Due to the fact that Timberland Bancorp, Inc. (NASDAQ:TSBK) has faced a decline in interest from hedge fund managers, it’s easy to see that there were a few hedge funds that elected to cut their positions entirely in the third quarter. Intriguingly, Israel Englander’s Millennium Management dumped the largest stake of the 750 funds followed by Insider Monkey, totaling an estimated $0.3 million in stock, and Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital was right behind this move, as the fund cut about $0.2 million worth. These moves are intriguing to say the least, as total hedge fund interest was cut by 2 funds in the third quarter.
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Timberland Bancorp, Inc. (NASDAQ:TSBK) but similarly valued. These stocks are Alexco Resource Corp. (NYSE:AXU), Denison Mines Corp (NYSE:DNN), RADA Electronic Industries Ltd. (NASDAQ:RADA), and Regional Management Corp (NYSE:RM). This group of stocks’ market valuations match TSBK’s market valuation.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
View table here if you experience formatting issues.
As you can see these stocks had an average of 6.25 hedge funds with bullish positions and the average amount invested in these stocks was $13 million. That figure was $20 million in TSBK’s case. Regional Management Corp (NYSE:RM) is the most popular stock in this table. On the other hand Alexco Resource Corp. (NYSE:AXU) is the least popular one with only 4 bullish hedge fund positions. Compared to these stocks Timberland Bancorp, Inc. (NASDAQ:TSBK) is even less popular than AXU. Hedge funds dodged a bullet by taking a bearish stance towards TSBK. Our calculations showed that the top 10 most popular hedge fund stocks returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 7.9% in 2020 through May 22nd but managed to beat the market by 15.6 percentage points. Unfortunately TSBK wasn’t nearly as popular as these 10 stocks (hedge fund sentiment was very bearish); TSBK investors were disappointed as the stock returned -4.9% during the second quarter (through May 22nd) 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 so far in 2020.
Disclosure: None. This article was originally published at Insider Monkey.