Where Do Hedge Funds Stand On Severn Bancorp Inc (SVBI)?

In this article you are going to find out whether hedge funds think Severn Bancorp Inc (NASDAQ:SVBI) is a good investment 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.

Hedge fund interest in Severn Bancorp Inc (NASDAQ:SVBI) shares was flat at the end of last quarter. This is usually a negative indicator. Our calculations also showed that SVBI 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). 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 S&W Seed Company (NASDAQ:SANW), USA Truck, Inc. (NASDAQ:USAK), and Pixelworks, Inc. (NASDAQ:PXLW) to gather more data points.

Video: Watch our video about the top 5 most popular hedge fund stocks.

Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research was 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’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.

Phil Stone of Fourthstone LLC

Phil Stone of Fourthstone LLC

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 10 most profitable companies in the world 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. Keeping this in mind we’re going to take a look at the new hedge fund action regarding Severn Bancorp Inc (NASDAQ:SVBI).

How have hedgies been trading Severn Bancorp Inc (NASDAQ:SVBI)?

Heading into the fourth quarter of 2020, a total of 4 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 0% from the second quarter of 2020. By comparison, 3 hedge funds held shares or bullish call options in SVBI a year ago. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, EJF Capital, managed by Emanuel J. Friedman, holds the biggest position in Severn Bancorp Inc (NASDAQ:SVBI). EJF Capital has a $6.5 million position in the stock, comprising 0.5% of its 13F portfolio. On EJF Capital’s heels is Fourthstone LLC, managed by Phil Stone, which holds a $5.9 million position; 5% of its 13F portfolio is allocated to the company. Some other hedge funds and institutional investors that hold long positions include Jeffrey Gendell’s Tontine Asset Management, Israel Englander’s Millennium Management and . In terms of the portfolio weights assigned to each position Fourthstone LLC allocated the biggest weight to Severn Bancorp Inc (NASDAQ:SVBI), around 4.98% of its 13F portfolio. EJF Capital is also relatively very bullish on the stock, setting aside 0.54 percent of its 13F equity portfolio to SVBI.

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 also examine hedge fund activity in other stocks – not necessarily in the same industry as Severn Bancorp Inc (NASDAQ:SVBI) but similarly valued. We will take a look at S&W Seed Company (NASDAQ:SANW), USA Truck, Inc. (NASDAQ:USAK), Pixelworks, Inc. (NASDAQ:PXLW), Manitex International, Inc. (NASDAQ:MNTX), American Virtual Cloud Technologies, Inc. (NASDAQ:AVCT), Mallinckrodt Public Limited Company (NYSE:MNK), and First United Corp (NASDAQ:FUNC). All of these stocks’ market caps are similar to SVBI’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
SANW 6 53342 0
USAK 8 2324 5
PXLW 9 4915 0
MNTX 6 8481 0
AVCT 2 1071 0
MNK 12 3417 -2
FUNC 4 3568 0
Average 6.7 11017 0.4

View table here if you experience formatting issues.

As you can see these stocks had an average of 6.7 hedge funds with bullish positions and the average amount invested in these stocks was $11 million. That figure was $15 million in SVBI’s case. Mallinckrodt Public Limited Company (NYSE:MNK) is the most popular stock in this table. On the other hand American Virtual Cloud Technologies, Inc. (NASDAQ:AVCT) is the least popular one with only 2 bullish hedge fund positions. Severn Bancorp Inc (NASDAQ:SVBI) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for SVBI is 45. 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. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. 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 30.7% in 2020 through November 27th and surpassed the market again by 16.1 percentage points. Unfortunately SVBI wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); SVBI investors were disappointed as the stock returned 6.2% since the end of September (through 11/27) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.

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