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Unity Bancorp, Inc. (UNTY): Hedge Fund Sentiment Unchanged

In this article you are going to find out whether hedge funds think Unity Bancorp, Inc. (NASDAQ:UNTY) is a good investment right now. We like to check what the smart money thinks first before doing extensive research on a given stock. Although there have been several high profile failed hedge fund picks, the consensus picks among hedge fund investors have historically outperformed the market after adjusting for known risk attributes. It’s not surprising given that hedge funds have access to better information and more resources to predict the winners in the stock market.

Unity Bancorp, Inc. (NASDAQ:UNTY) shares haven’t seen a lot of action during the first quarter. Overall, hedge fund sentiment was unchanged. The stock was in 4 hedge funds’ portfolios at the end of the first quarter of 2020. At the end of this article we will also compare UNTY to other stocks including Veritiv Corp (NYSE:VRTV), Del Taco Restaurants Inc (NASDAQ:TACO), and Coastal Financial Corporation (NASDAQ:CCB) to get a better sense of its popularity.

Video: Watch our video about the top 5 most popular hedge fund stocks.

At the moment there are several tools shareholders can use to size up stocks. A couple of the most underrated tools are hedge fund and insider trading indicators. Our researchers have shown that, historically, those who follow the best picks of the elite investment managers can beat the broader indices by a healthy amount (see the details here).

Fred Cummings of Elizabeth Park Capital

Fred Cummings of Elizabeth Park Capital

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, 2020’s unprecedented market conditions provide us with the highest number of trading opportunities in a decade. So we are checking out stocks recommended/scorned by legendary Bill Miller. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. 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 the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Now let’s view the fresh hedge fund action encompassing Unity Bancorp, Inc. (NASDAQ:UNTY).

What have hedge funds been doing with Unity Bancorp, Inc. (NASDAQ:UNTY)?

At Q1’s end, a total of 4 of the hedge funds tracked by Insider Monkey were long this stock, a change of 0% from the fourth quarter of 2019. By comparison, 4 hedge funds held shares or bullish call options in UNTY a year ago. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Of the funds tracked by Insider Monkey, Chuck Royce’s Royce & Associates has the most valuable position in Unity Bancorp, Inc. (NASDAQ:UNTY), worth close to $5.5 million, accounting for 0.1% of its total 13F portfolio. On Royce & Associates’s heels is EJF Capital, managed by Emanuel J. Friedman, which holds a $3.5 million position; the fund has 0.7% of its 13F portfolio invested in the stock. Some other hedge funds and institutional investors that hold long positions comprise Renaissance Technologies, Fred Cummings’s Elizabeth Park Capital Management and . In terms of the portfolio weights assigned to each position EJF Capital allocated the biggest weight to Unity Bancorp, Inc. (NASDAQ:UNTY), around 0.74% of its 13F portfolio. Elizabeth Park Capital Management is also relatively very bullish on the stock, designating 0.22 percent of its 13F equity portfolio to UNTY.

We view hedge fund activity in the stock unfavorable, but in this case there was only a single hedge fund selling its entire position: Endicott 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 Elizabeth Park Capital Management).

Let’s now review hedge fund activity in other stocks similar to Unity Bancorp, Inc. (NASDAQ:UNTY). These stocks are Veritiv Corp (NYSE:VRTV), Del Taco Restaurants Inc (NASDAQ:TACO), Coastal Financial Corporation (NASDAQ:CCB), and Workhorse Group, Inc. (NASDAQ:WKHS). All of these stocks’ market caps match UNTY’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
VRTV 13 33118 2
TACO 8 5571 0
CCB 2 11773 -2
WKHS 6 5522 -4
Average 7.25 13996 -1

View table here if you experience formatting issues.

As you can see these stocks had an average of 7.25 hedge funds with bullish positions and the average amount invested in these stocks was $14 million. That figure was $10 million in UNTY’s case. Veritiv Corp (NYSE:VRTV) is the most popular stock in this table. On the other hand Coastal Financial Corporation (NASDAQ:CCB) is the least popular one with only 2 bullish hedge fund positions. Unity Bancorp, Inc. (NASDAQ:UNTY) is not the least popular stock in this group but hedge fund interest is still below average. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 8.3% in 2020 through the end of May and still beat the market by 13.2 percentage points. A small number of hedge funds were also right about betting on UNTY as the stock returned 22.3% during the second quarter and outperformed the market by an even larger margin.

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