In this article we are going to use hedge fund sentiment as a tool and determine whether Northrim BanCorp, Inc. (NASDAQ:NRIM) is a good investment right now. We like to analyze hedge fund sentiment before conducting days of in-depth research. We do so because hedge funds and other elite investors have numerous Ivy League graduates, expert network advisers, and supply chain tipsters working or consulting for them. There is not a shortage of news stories covering failed hedge fund investments and it is a fact that hedge funds’ picks don’t beat the market 100% of the time, but their consensus picks have historically done very well and have outperformed the market after adjusting for risk.
Northrim BanCorp, Inc. (NASDAQ:NRIM) shares haven’t seen a lot of action during the second quarter. Overall, hedge fund sentiment was unchanged. The stock was in 11 hedge funds’ portfolios at the end of the third quarter of 2020. Our calculations also showed that NRIM isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video for a quick look at the top 5 stocks). At the end of this article we will also compare NRIM to other stocks including Century Casinos, Inc. (NASDAQ:CNTY), Soliton, Inc. (NASDAQ:SOLY), and Apyx Medical Corporation (NASDAQ:APYX) to get a better sense of its popularity.
Video: Watch our video about the top 5 most popular hedge fund stocks.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 66 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 13% through November 17th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 15 best blue chip stocks to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our website. Keeping this in mind let’s take a peek at the recent hedge fund action surrounding Northrim BanCorp, Inc. (NASDAQ:NRIM).
Do Hedge Funds Think NRIM Is A Good Stock To Buy Now?
At the end of the third quarter, a total of 11 of the hedge funds tracked by Insider Monkey were long this stock, a change of 0% from one quarter earlier. On the other hand, there were a total of 8 hedge funds with a bullish position in NRIM a year ago. With hedge funds’ capital changing hands, there exists an “upper tier” of notable hedge fund managers who were increasing their holdings considerably (or already accumulated large positions).
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Renaissance Technologies has the largest position in Northrim BanCorp, Inc. (NASDAQ:NRIM), worth close to $3.3 million, amounting to less than 0.1%% of its total 13F portfolio. The second most bullish fund manager is AltraVue Capital, managed by Touk Sinantha, which holds a $3 million position; the fund has 1.7% of its 13F portfolio invested in the stock. Remaining members of the smart money that hold long positions encompass Chuck Royce’s Royce & Associates, Gregg J. Powers’s Private Capital Management and Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital. In terms of the portfolio weights assigned to each position AltraVue Capital allocated the biggest weight to Northrim BanCorp, Inc. (NASDAQ:NRIM), around 1.75% of its 13F portfolio. Private Capital Management is also relatively very bullish on the stock, dishing out 0.38 percent of its 13F equity portfolio to NRIM.
We view hedge fund activity in the stock unfavorable, but in this case there was only a single hedge fund selling its entire position: AlphaOne Capital Partners. 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 Citadel Investment Group).
Let’s check out hedge fund activity in other stocks similar to Northrim BanCorp, Inc. (NASDAQ:NRIM). We will take a look at Century Casinos, Inc. (NASDAQ:CNTY), Soliton, Inc. (NASDAQ:SOLY), Apyx Medical Corporation (NASDAQ:APYX), Glory Star New Media Group Holdings Limited (NASDAQ:GSMG), Gencor Industries, Inc. (NASDAQ:GENC), Five Star Senior Living Inc. (NASDAQ:FVE), and Timkensteel Corp (NYSE:TMST). This group of stocks’ market caps resemble NRIM’s market cap.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
View table here if you experience formatting issues.
As you can see these stocks had an average of 6.9 hedge funds with bullish positions and the average amount invested in these stocks was $16 million. That figure was $13 million in NRIM’s case. Timkensteel Corp (NYSE:TMST) is the most popular stock in this table. On the other hand Soliton, Inc. (NASDAQ:SOLY) is the least popular one with only 1 bullish hedge fund positions. Northrim BanCorp, Inc. (NASDAQ:NRIM) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for NRIM is 80.5. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 32.9% in 2020 through December 8th and still beat the market by 16.2 percentage points. Hedge funds were also right about betting on NRIM as the stock returned 29.5% since the end of Q3 (through 12/8) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
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Disclosure: None. This article was originally published at Insider Monkey.