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Were Hedge Funds Right About Dumping Bryn Mawr Bank Corp. (BMTC)?

How do you pick the next stock to invest in? One way would be to spend days of research browsing through thousands of publicly traded companies. However, an easier way is to look at the stocks that smart money investors are collectively bullish on. Hedge funds and other institutional investors usually invest large amounts of capital and have to conduct due diligence while choosing their next pick. They don’t always get it right, but, on average, their stock picks historically generated strong returns after adjusting for known risk factors. With this in mind, let’s take a look at the recent hedge fund activity surrounding Bryn Mawr Bank Corp. (NASDAQ:BMTC).

Bryn Mawr Bank Corp. (NASDAQ:BMTC) was in 9 hedge funds’ portfolios at the end of the second quarter of 2019. BMTC has experienced a decrease in hedge fund sentiment lately. There were 10 hedge funds in our database with BMTC positions at the end of the previous quarter. Our calculations also showed that BMTC isn’t among the 30 most popular stocks among hedge funds (see the video below).
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

If you’d ask most shareholders, hedge funds are assumed to be slow, outdated financial tools of the past. While there are over 8000 funds in operation today, Our researchers choose to focus on the aristocrats of this group, around 750 funds. These hedge fund managers watch over the lion’s share of the smart money’s total capital, and by watching their best equity investments, Insider Monkey has unearthed numerous investment strategies that have historically outperformed the S&P 500 index. Insider Monkey’s flagship hedge fund strategy outstripped the S&P 500 index by around 5 percentage points per year since its inception in May 2014. We were able to generate large returns even by identifying short candidates. Our portfolio of short stocks lost 25.7% since February 2017 (through September 30th) even though the market was up more than 33% during the same period. We just shared a list of 10 short targets in our latest quarterly update .

BMTC_oct2019

Unlike former hedge manager, Dr. Steve Sjuggerud, who is convinced Dow will soar past 40000, our long-short investment strategy doesn’t rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. We’re going to take a look at the key hedge fund action surrounding Bryn Mawr Bank Corp. (NASDAQ:BMTC).

How have hedgies been trading Bryn Mawr Bank Corp. (NASDAQ:BMTC)?

Heading into the third quarter of 2019, a total of 9 of the hedge funds tracked by Insider Monkey were long this stock, a change of -10% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards BMTC over the last 16 quarters. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

AlphaOne Capital Partners' Returns, AUM and Holdings

Among these funds, Renaissance Technologies held the most valuable stake in Bryn Mawr Bank Corp. (NASDAQ:BMTC), which was worth $28.8 million at the end of the second quarter. On the second spot was Polaris Capital Management which amassed $2.3 million worth of shares. Moreover, Royce & Associates, Millennium Management, and AlphaOne Capital Partners were also bullish on Bryn Mawr Bank Corp. (NASDAQ:BMTC), allocating a large percentage of their portfolios to this stock.

We view hedge fund activity in the stock unfavorable, but in this case there was only a single hedge fund selling its entire position: Springbok Capital. 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 none of the 750+ hedge funds tracked by Insider Monkey identified BMTC as a viable investment and initiated a position in the stock.

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Bryn Mawr Bank Corp. (NASDAQ:BMTC) but similarly valued. These stocks are Speedway Motorsports, Inc. (NYSE:TRK), Grupo Supervielle S.A. (NYSE:SUPV), Celestica Inc. (NYSE:CLS), and CorePoint Lodging Inc. (NYSE:CPLG). This group of stocks’ market values are similar to BMTC’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
TRK 9 23289 0
SUPV 7 35642 -5
CLS 12 61125 -3
CPLG 8 16070 -5
Average 9 34032 -3.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 9 hedge funds with bullish positions and the average amount invested in these stocks was $34 million. That figure was $36 million in BMTC’s case. Celestica Inc. (NYSE:CLS) is the most popular stock in this table. On the other hand Grupo Supervielle S.A. (NYSE:SUPV) is the least popular one with only 7 bullish hedge fund positions. Bryn Mawr Bank Corp. (NASDAQ:BMTC) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 20 most popular stocks among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Unfortunately BMTC wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); BMTC investors were disappointed as the stock returned -1.5% during the third 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 many of these stocks already outperformed the market so far in 2019.

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

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