Out of thousands of stocks that are currently traded on the market, it is difficult to identify those that will really generate strong returns. Hedge funds and institutional investors spend millions of dollars on analysts with MBAs and PhDs, who are industry experts and well connected to other industry and media insiders on top of that. Individual investors can piggyback the hedge funds employing these talents and can benefit from their vast resources and knowledge in that way. We analyze quarterly 13F filings of nearly 817 hedge funds and, by looking at the smart money sentiment that surrounds a stock, we can determine whether it has the potential to beat the market over the long-term. Therefore, let’s take a closer look at what smart money thinks about TowneBank (NASDAQ:TOWN).
TowneBank (NASDAQ:TOWN) has seen an increase in support from the world's most elite money managers lately. TowneBank (NASDAQ:TOWN) was in 12 hedge funds' portfolios at the end of September. The all time high for this statistics is 12. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that TOWN 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.
To the average investor there are many tools stock market investors have at their disposal to size up their holdings. A duo of the most useful tools are hedge fund and insider trading signals. We have shown that, historically, those who follow the best picks of the elite investment managers can beat the market by a significant amount (see the details here).
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 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. Keeping this in mind let's analyze the recent hedge fund action surrounding TowneBank (NASDAQ:TOWN).
Do Hedge Funds Think TOWN Is A Good Stock To Buy Now?
Heading into the fourth quarter of 2020, a total of 12 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 33% from one quarter earlier. By comparison, 7 hedge funds held shares or bullish call options in TOWN a year ago. With hedgies' sentiment swirling, there exists an "upper tier" of noteworthy hedge fund managers who were upping their holdings meaningfully (or already accumulated large positions).
Is TOWN A Good Stock To Buy?
More specifically, Renaissance Technologies was the largest shareholder of TowneBank (NASDAQ:TOWN), with a stake worth $19.1 million reported as of the end of September. Trailing Renaissance Technologies was Millennium Management, which amassed a stake valued at $2.8 million. Arrowstreet Capital, Citadel Investment Group, and Two Sigma Advisors were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Fourthstone LLC allocated the biggest weight to TowneBank (NASDAQ:TOWN), around 0.23% of its 13F portfolio. Weld Capital Management is also relatively very bullish on the stock, designating 0.1 percent of its 13F equity portfolio to TOWN.
Consequently, key hedge funds have been driving this bullishness. Arrowstreet Capital, managed by Peter Rathjens, Bruce Clarke and John Campbell, assembled the largest position in TowneBank (NASDAQ:TOWN). Arrowstreet Capital had $2.6 million invested in the company at the end of the quarter. Paul Marshall and Ian Wace's Marshall Wace LLP also initiated a $0.4 million position during the quarter. The other funds with new positions in the stock are Phil Stone's Fourthstone LLC, Minhua Zhang's Weld Capital Management, and Donald Sussman's Paloma Partners.
Let's go over hedge fund activity in other stocks - not necessarily in the same industry as TowneBank (NASDAQ:TOWN) but similarly valued. These stocks are INMODE LTD. (NASDAQ:INMD), Inter Parfums, Inc. (NASDAQ:IPAR), Cinemark Holdings, Inc. (NYSE:CNK), First Financial Bancorp (NASDAQ:FFBC), Northwest Bancshares, Inc. (NASDAQ:NWBI), FBL Financial Group (NYSE:FFG), and Vista Outdoor Inc (NYSE:VSTO). This group of stocks' market caps match TOWN's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position INMD,16,111188,5 IPAR,17,61695,2 CNK,25,150590,1 FFBC,16,20797,3 NWBI,9,20409,1 FFG,11,46916,5 VSTO,28,257079,6 Average,17.4,95525,3.3 [/table]
As you can see these stocks had an average of 17.4 hedge funds with bullish positions and the average amount invested in these stocks was $96 million. That figure was $29 million in TOWN's case. Vista Outdoor Inc (NYSE:VSTO) is the most popular stock in this table. On the other hand Northwest Bancshares, Inc. (NASDAQ:NWBI) is the least popular one with only 9 bullish hedge fund positions. TowneBank (NASDAQ:TOWN) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for TOWN is 45.9. 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 32.9% in 2020 through December 8th and still beat the market by 16.2 percentage points. A small number of hedge funds were also right about betting on TOWN as the stock returned 41.4% since the end of the third quarter (through 12/8) and outperformed the market by an even larger margin.
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Disclosure: None. This article was originally published at Insider Monkey.
