What Do Hedge Funds Think About Heritage Oaks Bancorp (HEOP)?

At Insider Monkey we follow around 730 of the best-performing investors and even though many of them lost money in the last several months, the history teaches us that over the long-run they still manage to beat the market, which is why it can be profitable for us to imitate their activity. Of course, even the best money managers can sometimes get it wrong, but following some of their picks gives us a better chance to outperform the crowd than picking a random stock and this is where our research comes in.

Is Heritage Oaks Bancorp (NASDAQ:HEOP) a bargain? Prominent investors are turning less bullish. The number of bullish hedge fund positions stayed the same which is a slightly negative development in our experience. Heritage Oaks Bancorp (NASDAQ:HEOP) was in 4 hedge funds’ portfolios at the end of the third quarter of 2015. There were 4 hedge funds in our database with Heritage Oaks Bancorp (NASDAQ:HEOP) holdings at the end of the previous quarter. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Northern Oil & Gas, Inc. (NYSEMKT:NOG), Synutra International, Inc. (NASDAQ:SYUT), and Lion Biotechnologies Inc (NASDAQ:LBIO) to gather more data points.

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In the eyes of most market participants, hedge funds are seen as worthless, outdated investment vehicles of yesteryear. While there are over 8000 funds trading at present, we choose to focus on the bigwigs of this club, about 700 funds. These hedge fund managers orchestrate most of the smart money’s total asset base, and by tailing their first-class investments, Insider Monkey has unsheathed numerous investment strategies that have historically defeated the S&P 500 index. Insider Monkey’s small-cap hedge fund strategy beat the S&P 500 index by 12 percentage points annually for a decade in their back tests.

With all of this in mind, let’s review the latest action encompassing Heritage Oaks Bancorp (NASDAQ:HEOP).

Hedge fund activity in Heritage Oaks Bancorp (NASDAQ:HEOP)

At the end of the third quarter, a total of 4 of the hedge funds tracked by Insider Monkey held long positions in this stock, flat over the previous quarter. With hedge funds’ positions undergoing their usual ebb and flow, there exists an “upper tier” of noteworthy hedge fund managers who were upping their holdings meaningfully (or already accumulated large positions).

According to publicly available hedge fund holdings data compiled by Insider Monkey, Matthew Lindenbaum’s Basswood Capital had the largest position in Heritage Oaks Bancorp (NASDAQ:HEOP), worth close to $17.2 million, amounting to 0.8% of its total 13F portfolio. Coming in second is Michael Price of MFP Investors, with a $9.3 million position; 1.4% of its 13F portfolio is allocated to the company. Other members of the smart money that hold long positions comprise Anton Schutz’s Mendon Capital Advisors and Jim Simons’ Renaissance Technologies.

Earlier we told you that the aggregate hedge fund interest in the stock was unchanged and we view this as a negative development. Even though there weren’t any hedge funds dumping their holdings during the third quarter, there weren’t any hedge funds initiating brand new positions. This indicates that hedge funds, at the very best, perceive this stock as dead money and they haven’t identified any viable catalysts that can attract investor attention.

Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Heritage Oaks Bancorp (NASDAQ:HEOP) but similarly valued. These stocks are Northern Oil & Gas, Inc. (NYSEMKT:NOG), Synutra International, Inc. (NASDAQ:SYUT), Lion Biotechnologies Inc (NASDAQ:LBIO), and Tetraphase Pharmaceuticals Inc (NASDAQ:TTPH). All of these stocks’ market caps match Heritage Oaks Bancorp (NASDAQ:HEOP)’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
NOG 8 35890 -4
SYUT 5 1249 -1
LBIO 16 82563 -6
TTPH 15 26596 -6

As you can see these stocks had an average of 11 hedge funds with bullish positions and the average amount invested in these stocks was $37 million, above the $29 million in Heritage Oaks Bancorp (NASDAQ:HEOP)’s case. Lion Biotechnologies Inc (NASDAQ:LBIO) is the most popular stock in this table. On the other hand, Synutra International, Inc. (NASDAQ:SYUT) is the least popular one with only five bullish hedge fund positions. Compared to these stocks, Heritage Oaks Bancorp (NASDAQ:HEOP) is even less popular than Synutra International, Inc. (NASDAQ:SYUT), which suggests that the stock may not be the best alternative for a long position. 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 required.