At Insider Monkey, we pore over the filings of nearly 817 top investment firms every quarter, a process we have now completed for the latest reporting period. The data we’ve gathered as a result gives us access to a wealth of collective knowledge based on these firms’ portfolio holdings as of September 30. In this article, we will use that wealth of knowledge to determine whether or not Unity Bancorp, Inc. (NASDAQ:UNTY) makes for a good investment right now.
Is Unity Bancorp, Inc. (NASDAQ:UNTY) a great investment right now? Investors who are in the know were buying. The number of bullish hedge fund bets rose by 2 in recent months. Unity Bancorp, Inc. (NASDAQ:UNTY) was in 7 hedge funds’ portfolios at the end of the third quarter of 2020. The all time high for this statistics is 6. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that UNTY 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.
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. Now we’re going to go over the recent hedge fund action surrounding Unity Bancorp, Inc. (NASDAQ:UNTY).
Hedge fund activity in Unity Bancorp, Inc. (NASDAQ:UNTY)
At Q3’s end, a total of 7 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 40% from one quarter earlier. By comparison, 4 hedge funds held shares or bullish call options in UNTY a year ago. With the smart money’s positions undergoing their usual ebb and flow, there exists an “upper tier” of notable hedge fund managers who were increasing their stakes meaningfully (or already accumulated large positions).
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Robert I. Usdan and Wayne K. Goldstein’s Endicott Management has the largest position in Unity Bancorp, Inc. (NASDAQ:UNTY), worth close to $7.7 million, amounting to 10.5% of its total 13F portfolio. The second largest stake is held by EJF Capital, managed by Emanuel J. Friedman, which holds a $3.5 million position; 0.3% of its 13F portfolio is allocated to the stock. Other peers that are bullish comprise Chuck Royce’s Royce & Associates, Renaissance Technologies and Fred Cummings’s Elizabeth Park Capital Management. In terms of the portfolio weights assigned to each position Endicott Management allocated the biggest weight to Unity Bancorp, Inc. (NASDAQ:UNTY), around 10.53% of its 13F portfolio. Zebra Capital Management is also relatively very bullish on the stock, designating 0.37 percent of its 13F equity portfolio to UNTY.
As one would reasonably expect, some big names were leading the bulls’ herd. Zebra Capital Management, managed by Roger Ibbotson, assembled the biggest position in Unity Bancorp, Inc. (NASDAQ:UNTY). Zebra Capital Management had $0.2 million invested in the company at the end of the quarter. Israel Englander’s Millennium Management also made a $0.2 million investment in the stock during the quarter.
Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Unity Bancorp, Inc. (NASDAQ:UNTY) but similarly valued. We will take a look at The Bank of Princeton (NASDAQ:BPRN), Middlefield Banc Corp. (NASDAQ:MBCN), Capital Product Partners L.P. (NASDAQ:CPLP), Hawthorn Bancshares, Inc. (NASDAQ:HWBK), Energous Corporation (NASDAQ:WATT), BayCom Corp (NASDAQ:BCML), and Oxford Square Capital Corp. (NASDAQ:OXSQ). This group of stocks’ market values match UNTY’s market value.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
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As you can see these stocks had an average of 3.1 hedge funds with bullish positions and the average amount invested in these stocks was $5 million. That figure was $15 million in UNTY’s case. Energous Corporation (NASDAQ:WATT) is the most popular stock in this table. On the other hand Hawthorn Bancshares, Inc. (NASDAQ:HWBK) is the least popular one with only 1 bullish hedge fund positions. Compared to these stocks Unity Bancorp, Inc. (NASDAQ:UNTY) is more popular among hedge funds. Our overall hedge fund sentiment score for UNTY is 87. 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 returned 31.6% in 2020 through December 2nd but still managed to beat the market by 16 percentage points. Hedge funds were also right about betting on UNTY as the stock returned 52.3% since the end of September (through 12/2) and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.
Disclosure: None. This article was originally published at Insider Monkey.