Were Hedge Funds Right About Piling Into Brookline Bancorp, Inc. (BRKL)?

Is Brookline Bancorp, Inc. (NASDAQ:BRKL) a good equity to bet on 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.

Brookline Bancorp, Inc. (NASDAQ:BRKL) investors should pay attention to an increase in hedge fund interest of late. Our calculations also showed that BRKL 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.

So, why do we pay attention to hedge fund sentiment before making any investment decisions? Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the Russell 2000 ETFs by 40 percentage points since May 2014 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.


Jim Simons of Renaissance Technologies

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  based on an under-the-radar fund manager’s investor letter and the stock gained 20 percent. Let’s view the latest hedge fund action surrounding Brookline Bancorp, Inc. (NASDAQ:BRKL).

How are hedge funds trading Brookline Bancorp, Inc. (NASDAQ:BRKL)?

At the end of the third quarter, a total of 11 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 38% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards BRKL over the last 17 quarters. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Is BRKL A Good Stock To Buy?

According to Insider Monkey’s hedge fund database, Renaissance Technologies has the most valuable position in Brookline Bancorp, Inc. (NASDAQ:BRKL), worth close to $26.8 million, comprising less than 0.1%% of its total 13F portfolio. The second largest stake is held by Polaris Capital Management, managed by Bernard Horn, which holds a $16.8 million position; 0.8% of its 13F portfolio is allocated to the company. Some other hedge funds and institutional investors that hold long positions contain John D. Gillespie’s Prospector Partners, Israel Englander’s Millennium Management and Ken Griffin’s Citadel Investment Group. In terms of the portfolio weights assigned to each position Prospector Partners allocated the biggest weight to Brookline Bancorp, Inc. (NASDAQ:BRKL), around 0.92% of its 13F portfolio. Polaris Capital Management is also relatively very bullish on the stock, earmarking 0.76 percent of its 13F equity portfolio to BRKL.

As aggregate interest increased, some big names have been driving this bullishness. Prospector Partners, managed by John D. Gillespie, initiated the most valuable position in Brookline Bancorp, Inc. (NASDAQ:BRKL). Prospector Partners had $6.3 million invested in the company at the end of the quarter. John Overdeck and David Siegel’s Two Sigma Advisors also made a $0.5 million investment in the stock during the quarter. The other funds with brand new BRKL positions are David Harding’s Winton Capital Management and Paul Marshall and Ian Wace’s Marshall Wace.

Let’s now review hedge fund activity in other stocks similar to Brookline Bancorp, Inc. (NASDAQ:BRKL). These stocks are Enanta Pharmaceuticals Inc (NASDAQ:ENTA), Kearny Financial Corp. (NASDAQ:KRNY), Encore Wire Corporation (NASDAQ:WIRE), and Tronox Limited (NYSE:TROX). This group of stocks’ market valuations resemble BRKL’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
ENTA 16 200896 -4
KRNY 16 132793 3
WIRE 16 45331 1
TROX 18 115194 -2
Average 16.5 123554 -0.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 16.5 hedge funds with bullish positions and the average amount invested in these stocks was $124 million. That figure was $59 million in BRKL’s case. Tronox Limited (NYSE:TROX) is the most popular stock in this table. On the other hand Enanta Pharmaceuticals Inc (NASDAQ:ENTA) is the least popular one with only 16 bullish hedge fund positions. Compared to these stocks Brookline Bancorp, Inc. (NASDAQ:BRKL) is even less popular than ENTA. 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. A small number of hedge funds were also right about betting on BRKL, though not to the same extent, as the stock returned 9.8% during the fourth quarter (through 11/30) and outperformed the market as well.

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