Northrim BanCorp, Inc. (NRIM): Are Hedge Funds Right About This Stock?

Hedge funds are not perfect. They have their bad picks just like everyone else. Facebook, a stock hedge funds have loved dearly, lost nearly 40% of its value at one point in 2018. Although hedge funds are not perfect, their consensus picks do deliver solid returns, however. Our data show the top 20 S&P 500 stocks among hedge funds beat the S&P 500 Index by nearly 10 percentage points so far in 2019. Because hedge funds have a lot of resources and their consensus picks do well, we pay attention to what they think. In this article, we analyze what the elite funds think of Northrim BanCorp, Inc. (NASDAQ:NRIM).

Northrim BanCorp, Inc. (NASDAQ:NRIM) was in 7 hedge funds’ portfolios at the end of September. NRIM has experienced a decrease in enthusiasm from smart money in recent months. There were 8 hedge funds in our database with NRIM positions at the end of the previous quarter. Our calculations also showed that NRIM isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings).
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to 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 flagship best performing hedge funds strategy returned 91% since May 2014 and outperformed the Russell 2000 ETFs by nearly 40 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.

David Harding

David Harding of Winton Capital Management

We leave no stone unturned when looking for the next great investment idea. For example Discover is offering this insane cashback card, so we look into shorting the stock. One of the most bullish analysts in America just put his money where his mouth is. He says, “I’m investing more today than I did back in early 2009.” So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We even check out this option genius’ weekly trade ideas. This December, we recommended Adams Energy as a one-way bet based on an under-the-radar fund manager’s investor letter and the stock already gained 20 percent. Now we’re going to check out the recent hedge fund action encompassing Northrim BanCorp, Inc. (NASDAQ:NRIM).

How have hedgies been trading Northrim BanCorp, Inc. (NASDAQ:NRIM)?

Heading into the fourth quarter of 2019, a total of 7 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -13% from the previous quarter. By comparison, 6 hedge funds held shares or bullish call options in NRIM a year ago. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Among these funds, Royce & Associates held the most valuable stake in Northrim BanCorp, Inc. (NASDAQ:NRIM), which was worth $15.7 million at the end of the third quarter. On the second spot was Renaissance Technologies which amassed $7.2 million worth of shares. Private Capital Management, Arrowstreet Capital, and Winton Capital 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 Private Capital Management allocated the biggest weight to Northrim BanCorp, Inc. (NASDAQ:NRIM), around 0.57% of its 13F portfolio. AlphaOne Capital Partners is also relatively very bullish on the stock, earmarking 0.4 percent of its 13F equity portfolio to NRIM.

Due to the fact that Northrim BanCorp, Inc. (NASDAQ:NRIM) has witnessed bearish sentiment from hedge fund managers, it’s safe to say that there was a specific group of fund managers that elected to cut their entire stakes by the end of the third quarter. Interestingly, Israel Englander’s Millennium Management dropped the biggest position of the 750 funds tracked by Insider Monkey, totaling close to $0.4 million in stock. Thomas Bailard’s fund, Bailard Inc, also cut its stock, about $0.3 million worth. These bearish behaviors are important to note, as aggregate hedge fund interest was cut by 1 funds by the end of the third quarter.

Let’s now review hedge fund activity in other stocks similar to Northrim BanCorp, Inc. (NASDAQ:NRIM). These stocks are Ames National Corporation (NASDAQ:ATLO), Unity Biotechnology, Inc. (NASDAQ:UBX), Compugen Ltd. (NASDAQ:CGEN), and ShotSpotter, Inc. (NASDAQ:SSTI). This group of stocks’ market caps resemble NRIM’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
ATLO 3 21073 0
UBX 4 4111 -1
CGEN 4 7644 -1
SSTI 6 12594 0
Average 4.25 11356 -0.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 4.25 hedge funds with bullish positions and the average amount invested in these stocks was $11 million. That figure was $29 million in NRIM’s case. ShotSpotter, Inc. (NASDAQ:SSTI) is the most popular stock in this table. On the other hand Ames National Corporation (NASDAQ:ATLO) is the least popular one with only 3 bullish hedge fund positions. Compared to these stocks Northrim BanCorp, Inc. (NASDAQ:NRIM) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately NRIM wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on NRIM were disappointed as the stock returned -5.5% during the first two months of the fourth 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 20 most popular stocks among hedge funds as 70 percent of these stocks already outperformed the market in Q4.

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