Should You Buy First Defiance Financial (FDEF)?

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We view hedge fund activity in the stock unfavorable, but in this case there was only a single hedge fund selling its entire position: Balyasny Asset Management. 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 only one of the 800+ hedge funds tracked by Insider Monkey identified as a viable investment and initiated a position in the stock (that fund was Arrowstreet Capital).

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as First Defiance Financial (NASDAQ:FDEF) but similarly valued. We will take a look at Blue Nile Inc (NASDAQ:NILE), Franklin Financial Network Inc (NYSE:FSB), Conyers Park Acquisition Corp. (NASDAQ:CPAA), and Navigator Holdings Ltd (NYSE:NVGS). This group of stocks’ market values resemble FDEF’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
NILE 14 69025 1
FSB 8 5708 4
CPAA 19 241795 19
NVGS 9 182211 -7

As you can see these stocks had an average of 12 hedge funds with bullish positions and the average amount invested in these stocks was $125 million. That figure was $21 million in FDEF’s case. Conyers Park Acquisition Corp. (NASDAQ:CPAA) is the most popular stock in this table. On the other hand Franklin Financial Network Inc (NYSE:FSB) is the least popular one with only 8 bullish hedge fund positions. Compared to these stocks First Defiance Financial (NASDAQ:FDEF) is even less popular than FSB. 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


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