Where Do Hedge Funds Stand On Pacific Premier Bancorp, Inc. (PPBI)?

Our extensive research has shown that imitating the smart money can generate significant returns for retail investors, which is why we track nearly 817 active prominent money managers and analyze their quarterly 13F filings. The stocks that are heavily bought by hedge funds historically outperformed the market, though there is no shortage of high profile failures like hedge funds’ 2018 losses in Facebook and Apple. Let’s take a closer look at what the funds we track think about Pacific Premier Bancorp, Inc. (NASDAQ:PPBI) in this article.

Pacific Premier Bancorp, Inc. (NASDAQ:PPBI) has experienced a decrease in activity from the world’s largest hedge funds lately. Pacific Premier Bancorp, Inc. (NASDAQ:PPBI) was in 8 hedge funds’ portfolios at the end of September. The all time high for this statistics is 17. There were 11 hedge funds in our database with PPBI holdings at the end of June. Our calculations also showed that PPBI 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).

Video: 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 S&P 500 ETFs by more than 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 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.

Emanuel J. Friedman

Emanuel Friedman of EJF Capital

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. With all of this in mind let’s review the key hedge fund action surrounding Pacific Premier Bancorp, Inc. (NASDAQ:PPBI).

Hedge fund activity in Pacific Premier Bancorp, Inc. (NASDAQ:PPBI)

At Q3’s end, a total of 8 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -27% from the previous quarter. By comparison, 8 hedge funds held shares or bullish call options in PPBI a year ago. With hedgies’ capital changing hands, there exists a few notable hedge fund managers who were upping their stakes meaningfully (or already accumulated large positions).

The largest stake in Pacific Premier Bancorp, Inc. (NASDAQ:PPBI) was held by Cardinal Capital, which reported holding $45.2 million worth of stock at the end of September. It was followed by GLG Partners with a $8.3 million position. Other investors bullish on the company included EJF Capital, JCSD Capital, and Renaissance Technologies. In terms of the portfolio weights assigned to each position JCSD Capital allocated the biggest weight to Pacific Premier Bancorp, Inc. (NASDAQ:PPBI), around 3.36% of its 13F portfolio. Cardinal Capital is also relatively very bullish on the stock, setting aside 1.89 percent of its 13F equity portfolio to PPBI.

Because Pacific Premier Bancorp, Inc. (NASDAQ:PPBI) has witnessed falling interest from the smart money, logic holds that there were a few fund managers who were dropping their entire stakes by the end of the third quarter. Interestingly, Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital dropped the biggest stake of all the hedgies monitored by Insider Monkey, valued at about $8.6 million in stock, and Paul Tudor Jones’s Tudor Investment Corp was right behind this move, as the fund dumped about $1.3 million worth. These transactions are important to note, as total hedge fund interest was cut by 3 funds by the end of the third quarter.

Let’s check out hedge fund activity in other stocks similar to Pacific Premier Bancorp, Inc. (NASDAQ:PPBI). These stocks are Prospect Capital Corporation (NASDAQ:PSEC), Pacific Biosciences of California, Inc. (NASDAQ:PACB), CommVault Systems, Inc. (NASDAQ:CVLT), Bed Bath & Beyond Inc. (NASDAQ:BBBY), Summit Materials Inc (NYSE:SUM), Shutterstock Inc (NYSE:SSTK), and Bottomline Technologies (de), Inc. (NASDAQ:EPAY). All of these stocks’ market caps are closest to PPBI’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
PSEC 7 13771 0
PACB 25 380591 3
CVLT 24 426431 2
BBBY 32 498555 -1
SUM 31 198477 8
SSTK 19 130847 3
EPAY 21 123308 3
Average 22.7 253140 2.6

View table here if you experience formatting issues.

As you can see these stocks had an average of 22.7 hedge funds with bullish positions and the average amount invested in these stocks was $253 million. That figure was $62 million in PPBI’s case. Bed Bath & Beyond Inc. (NASDAQ:BBBY) is the most popular stock in this table. On the other hand Prospect Capital Corporation (NASDAQ:PSEC) is the least popular one with only 7 bullish hedge fund positions. Pacific Premier Bancorp, Inc. (NASDAQ:PPBI) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for PPBI is 18.1. 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 31.6% in 2020 through December 2nd and still beat the market by 16 percentage points. A small number of hedge funds were also right about betting on PPBI as the stock returned 49.7% since the end of the third quarter (through 12/2) and outperformed the market by an even larger margin.

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