What Smart Money Sentiment Tells Us About Berkshire Hills Bancorp, Inc. (BHLB)

At Insider Monkey we track the activity of some of the best-performing hedge funds like Appaloosa Management, Baupost, and Third Point because we determined that some of the stocks that they are collectively bullish on can help us generate returns above the broader indices. Out of thousands of stocks that hedge funds invest in, small-caps can provide the best returns over the long term due to the fact that these companies are less efficiently priced and are usually under the radars of mass-media, analysts and dumb money. This is why we follow the smart money moves in the small-cap space.

Is Berkshire Hills Bancorp, Inc. (NYSE:BHLB) undervalued? Money managers are categorically in an optimistic mood. The number of long hedge fund bets grew by 2 lately. At the end of this article we will also compare BHLB to other stocks including First Busey Corporation (NASDAQ:BUSE), Liberty Braves Group (NASDAQ:BATRK), and Global Blood Therapeutics Inc (NASDAQ:GBT) to get a better sense of its popularity.

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We follow over 700 hedge funds and other institutional investors and by analyzing their quarterly 13F filings, we identify stocks that they are collectively bullish on and develop investment strategies based on this data. One strategy that outperformed the market over the last year involves selecting the 100 best-performing funds and identifying the 30 mid-cap stocks that they are collectively most bullish on. Over the past year, this strategy generated returns of 18%, topping the 8% gain registered by S&P 500 ETFs. We launched this strategy 2.5 years ago and it returned more than 39% since then, vs. 22% gain registered by the S&P 500 ETFs.

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Hedge fund activity in Berkshire Hills Bancorp, Inc. (NYSE:BHLB)

Heading into the fourth quarter of 2016, a total of 11 of the hedge funds tracked by Insider Monkey were bullish on this stock, a 22% increase from the second quarter of 2016. The graph below displays the number of hedge funds with bullish position in BHLB over the last 5 quarters, which shows a slight rebound since a big drop in ownership in Q4 2015. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

According to Insider Monkey’s hedge fund database, Millennium Management, one of the 10 largest hedge funds in the world, holds the most valuable position in Berkshire Hills Bancorp, Inc. (NYSE:BHLB). Millennium Management has a $14.1 million position in the stock. The second most bullish fund is Jim Simons’ Renaissance Technologies, with an $8.5 million position. Some other professional money managers that hold long positions comprise David E. Shaw’s D E Shaw, Emanuel J. Friedman’s EJF Capital, and John Overdeck and David Siegel’s Two Sigma Advisors. We should note that none of these hedge funds are among our list of the 100 best performing hedge funds which is based on the performance of their 13F long positions in non-microcap stocks.

As industry-wide interest jumped, specific money managers have been driving this bullishness. EJF Capital established the most outsized position in Berkshire Hills Bancorp, Inc. (NYSE:BHLB). EJF Capital had $2.8 million invested in the company at the end of the quarter. George Hall’s Clinton Group also made a $0.3 million investment in the stock during the quarter.

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Berkshire Hills Bancorp, Inc. (NYSE:BHLB) but similarly valued. We will take a look at First Busey Corporation (NASDAQ:BUSE), Liberty Braves Group (NASDAQ:BATRK), Global Blood Therapeutics Inc (NASDAQ:GBT), and Liberty Braves Group (NASDAQ:BATRA). This group of stocks’ market valuations match BHLB’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
BUSE 11 22185 2
BATRK 29 268615 0
GBT 16 139081 -4
BATRA 15 61970 -3

As you can see these stocks had an average of 18 hedge funds with bullish positions and the average amount invested in these stocks was $123 million. That figure was $36 million in BHLB’s case. Liberty Braves Group (NASDAQ:BATRK) is the most popular stock in this table. On the other hand First Busey Corporation (NASDAQ:BUSE) is the least popular one with only 11 bullish hedge fund positions. Compared to these stocks Berkshire Hills Bancorp, Inc. (NYSE:BHLB) is only as popular as the least popular stock on that list, BUSE. 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 have uncovered the bullish thesis. In either case more research is warranted.

Disclosure: None