In this article we will check out the progression of hedge fund sentiment towards Shore Bancshares, Inc. (NASDAQ:SHBI) and determine whether it is a good investment right now. We at Insider Monkey like to examine what billionaires and hedge funds think of a company before spending days of research on it. Given their 2 and 20 payment structure, hedge funds have more incentives and resources than the average investor. The funds have access to expert networks and get tips from industry insiders. They also employ numerous Ivy League graduates and MBAs. Like everyone else, hedge funds perform miserably at times, but their consensus picks have historically outperformed the market after risk adjustments.
Shore Bancshares, Inc. (NASDAQ:SHBI) was in 5 hedge funds’ portfolios at the end of September. The all time high for this statistics is 8. SHBI investors should pay attention to a decrease in hedge fund interest of late. There were 6 hedge funds in our database with SHBI holdings at the end of June. Our calculations also showed that SHBI 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.
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s monthly stock picks returned 113% since March 2017 and outperformed the S&P 500 ETFs by more than 66 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a 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. With all of this in mind let’s check out the recent hedge fund action surrounding Shore Bancshares, Inc. (NASDAQ:SHBI).
How are hedge funds trading Shore Bancshares, Inc. (NASDAQ:SHBI)?
At third quarter’s end, a total of 5 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -17% from the second quarter of 2020. On the other hand, there were a total of 3 hedge funds with a bullish position in SHBI a year ago. So, let’s find out 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, Phil Stone’s Fourthstone LLC has the largest position in Shore Bancshares, Inc. (NASDAQ:SHBI), worth close to $13.7 million, comprising 11.5% of its total 13F portfolio. The second most bullish fund manager is Renaissance Technologies, with a $3.9 million position; less than 0.1%% of its 13F portfolio is allocated to the stock. Remaining members of the smart money that are bullish encompass Jeffrey Gendell’s Tontine Asset Management, Frederick DiSanto’s Ancora Advisors and Roger Ibbotson’s Zebra Capital Management. In terms of the portfolio weights assigned to each position Fourthstone LLC allocated the biggest weight to Shore Bancshares, Inc. (NASDAQ:SHBI), around 11.5% of its 13F portfolio. Zebra Capital Management is also relatively very bullish on the stock, dishing out 0.28 percent of its 13F equity portfolio to SHBI.
Since Shore Bancshares, Inc. (NASDAQ:SHBI) has witnessed bearish sentiment from the aggregate hedge fund industry, it’s safe to say that there exists a select few hedgies that slashed their full holdings by the end of the third quarter. At the top of the heap, Emanuel J. Friedman’s EJF Capital said goodbye to the biggest stake of all the hedgies watched by Insider Monkey, valued at close to $1.6 million in stock, and Thomas Bailard’s Bailard Inc was right behind this move, as the fund cut about $0.1 million worth. These moves are intriguing to say the least, as aggregate hedge fund interest dropped by 1 funds by the end of the third quarter.
Let’s go over hedge fund activity in other stocks similar to Shore Bancshares, Inc. (NASDAQ:SHBI). We will take a look at Surgalign Holdings, Inc. (NASDAQ:SRGA), Strongbridge Biopharma plc (NASDAQ:SBBP), Tanzanian Gold Corporation (NYSE:TRX), Fonar Corporation (NASDAQ:FONR), BELLUS Health Inc. (NASDAQ:BLU), Exagen Inc. (NASDAQ:XGN), and Bassett Furniture Industries Inc. (NASDAQ:BSET). This group of stocks’ market valuations resemble SHBI’s market valuation.
|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 6.6 hedge funds with bullish positions and the average amount invested in these stocks was $15 million. That figure was $19 million in SHBI’s case. Surgalign Holdings, Inc. (NASDAQ:SRGA) is the most popular stock in this table. On the other hand Exagen Inc. (NASDAQ:XGN) is the least popular one with only 1 bullish hedge fund positions. Shore Bancshares, Inc. (NASDAQ:SHBI) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for SHBI is 39.4. 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 30.7% in 2020 through November 27th and still beat the market by 16.1 percentage points. A small number of hedge funds were also right about betting on SHBI as the stock returned 27.7% since the end of the third quarter (through 11/27) and outperformed the market by an even larger margin.
Disclosure: None. This article was originally published at Insider Monkey.