Although the masses and most of the financial media blame hedge funds for their exorbitant fee structure and disappointing performance, these investors have proved to have great stock picking abilities over the years (that’s why their assets under management continue to swell). We believe hedge fund sentiment should serve as a crucial tool of an individual investor’s stock selection process, as it may offer great insights of how the brightest minds of the finance industry feel about specific stocks. After all, these people have access to smartest analysts and expensive data/information sources that individual investors can’t match. So should one consider investing in Territorial Bancorp Inc (NASDAQ:TBNK)? The smart money sentiment can provide an answer to this question.
Is Territorial Bancorp Inc (NASDAQ:TBNK) going to take off soon? The best stock pickers were in a bearish mood. The number of long hedge fund positions retreated by 1 recently. Territorial Bancorp Inc (NASDAQ:TBNK) was in 4 hedge funds’ portfolios at the end of the third quarter of 2020. The all time high for this statistics is 8. Our calculations also showed that TBNK 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). There were 5 hedge funds in our database with TBNK holdings at the end of June.
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.
John Overdeck of Two Sigma Advisors
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. With all of this in mind let’s take a look at the key hedge fund action surrounding Territorial Bancorp Inc (NASDAQ:TBNK).
What does smart money think about Territorial Bancorp Inc (NASDAQ:TBNK)?
At the end of the third quarter, a total of 4 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -20% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards TBNK over the last 21 quarters. With hedge funds’ capital changing hands, there exists a few noteworthy hedge fund managers who were adding to their stakes meaningfully (or already accumulated large positions).
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Renaissance Technologies has the number one position in Territorial Bancorp Inc (NASDAQ:TBNK), worth close to $13.6 million, corresponding to less than 0.1%% of its total 13F portfolio. Sitting at the No. 2 spot is Chuck Royce of Royce & Associates, with a $3.2 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Some other members of the smart money that hold long positions include David Harding’s Winton Capital Management, John Overdeck and David Siegel’s Two Sigma Advisors and . In terms of the portfolio weights assigned to each position Royce & Associates allocated the biggest weight to Territorial Bancorp Inc (NASDAQ:TBNK), around 0.03% of its 13F portfolio. Winton Capital Management is also relatively very bullish on the stock, designating 0.02 percent of its 13F equity portfolio to TBNK.
We view hedge fund activity in the stock unfavorable, but in this case there was only a single hedge fund selling its entire position: Citadel Investment Group. 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 none of the 750+ hedge funds tracked by Insider Monkey identified TBNK as a viable investment and initiated a position in the stock.
Let’s now review hedge fund activity in other stocks similar to Territorial Bancorp Inc (NASDAQ:TBNK). We will take a look at Net 1 UEPS Technologies Inc (NASDAQ:UEPS), Summit Financial Group, Inc. (NASDAQ:SMMF), Evofem Biosciences, Inc. (NASDAQ:EVFM), Callon Petroleum Company (NYSE:CPE), RGC Resources, Inc. (NASDAQ:RGCO), MVB Financial Corp. (NASDAQ:MVBF), and General Finance Corporation (NASDAQ:GFN). This group of stocks’ market caps are similar to TBNK’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| UEPS | 13 | 30324 | -1 |
| SMMF | 3 | 4503 | -1 |
| EVFM | 11 | 4626 | -4 |
| CPE | 4 | 9386 | -16 |
| RGCO | 1 | 1916 | -1 |
| MVBF | 3 | 22290 | -2 |
| GFN | 3 | 7753 | -1 |
| Average | 5.4 | 11543 | -3.7 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 5.4 hedge funds with bullish positions and the average amount invested in these stocks was $12 million. That figure was $18 million in TBNK’s case. Net 1 UEPS Technologies Inc (NASDAQ:UEPS) is the most popular stock in this table. On the other hand RGC Resources, Inc. (NASDAQ:RGCO) is the least popular one with only 1 bullish hedge fund positions. Territorial Bancorp Inc (NASDAQ:TBNK) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for TBNK is 31.5. 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 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 TBNK as the stock returned 16.4% since the end of the third quarter (through 11/27) and outperformed the market by an even larger margin.
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Disclosure: None. This article was originally published at Insider Monkey.
