Information which must be reported on 13G and 13D forms must be filed with the U.S. Securities and Exchange Commission within ten days of the event in question in most cases, which includes when a hedge fund or other money manager acquires 5% or more of a public company’s shares. These filings can offer great buying opportunities considering the evidence showing that activist targets tend to greatly outperform the broader market on aggregate. That being said, this article will discuss three moves made by several hedge funds tracked by Insider Monkey, and will also lay out the hedge fund sentiment on each of the stocks discussed.
Hedge funds have been underperforming the market for a very long time. However, this was mainly because of the huge fees that hedge funds charge as well as the poor performance of their short books. Hedge funds’ long positions performed actually better than the market. Small-cap stocks, activist targets, and spinoffs were among the bright spots in hedge funds’ portfolios. For instance, the 15 most popular small-cap stocks among hedge funds outperformed the market by more than 53 percentage points since the end of August 2012, returning 102% (read the details here). This strategy also managed to beat the market by double digits annually in our back tests covering the 1999-2012 period.
In a freshly-amended 13D filing with the SEC, George Hall’s Clinton Group reported owing 1.50 million shares of Pacific Mercantile Bancorp (NASDAQ:PMBC). The disclosed stake accounts for 6.6% of the company’s outstanding common stock. Clinton Group filed its first 13D form regarding the bank holding company for the Pacific Mercantile Bank back in September 2011, and the investment firm is currently discarding its position. George Hall’s firm disclosed an ownership stake of 2.08 million shares via the latest amendment to the 13D filing on the company submitted on October 1, 2015. Shares of Pacific Mercantile Bancorp (NASDAQ:PMBC) have advanced by 60% since the beginning of September 2011, so it appears that Hall’s firm has generated a good return on this investment. Just recently, the bank reported third quarter earnings per share of $0.02, compared to EPS of $0.01 reported in the second quarter of 2015 and a net loss per share of $0.02 reported in the third quarter a year ago.
It is also worth pointing out that the shares of the bank holding company are currently trading at a forward P/E ratio of 40.75, compared to the median of 17.89 for the companies included in the S&P 500 index. Hence, it seems that right now is the opportune time for Clinton Group to take some profits off the table. From our extensive database of hedge funds, Matthew Lindenbaum’s Basswood Capital was the top equity holder of Pacific Mercantile Bancorp (NASDAQ:PMBC) at the end of the second quarter.
Let’s head to the next page, where we discuss the freshly-made moves of Odey Asset Management and Whitebox Advisors.