At the end of February we announced the arrival of the first US recession since 2009 and we predicted that the market will decline by at least 20% in (Recession is Imminent: We Need A Travel Ban NOW). In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. In this article, we will take a closer look at hedge fund sentiment towards WestAmerica Bancorp. (NASDAQ:WABC).
Is WestAmerica Bancorp. (NASDAQ:WABC) a sound investment today? Prominent investors are getting less optimistic. The number of long hedge fund bets were cut by 3 in recent months. Our calculations also showed that WABC isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks). WABC was in 8 hedge funds' portfolios at the end of March. There were 11 hedge funds in our database with WABC positions at the end of the previous quarter.
Video: Watch our video about the top 5 most popular hedge fund stocks.
In today’s marketplace there are dozens of formulas stock traders can use to analyze publicly traded companies. A couple of the most underrated formulas are hedge fund and insider trading interest. Our researchers have shown that, historically, those who follow the top picks of the elite hedge fund managers can outperform their index-focused peers by a solid amount (see the details here).
Dmitry Balyasny of Balyasny Asset Management[/caption]
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, We take a look at lists like the 10 most profitable companies in the world to identify the compounders that are likely to deliver double digit returns. We interview hedge fund managers and ask them about their best ideas. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. For example we are checking out stocks recommended/scorned by legendary Bill Miller. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 in February after realizing the coronavirus pandemic’s significance before most investors. Now we're going to review the new hedge fund action regarding WestAmerica Bancorp. (NASDAQ:WABC).
What have hedge funds been doing with WestAmerica Bancorp. (NASDAQ:WABC)?
At Q1's end, a total of 8 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -27% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in WABC over the last 18 quarters. So, let's find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Of the funds tracked by Insider Monkey, Ken Griffin's Citadel Investment Group has the biggest position in WestAmerica Bancorp. (NASDAQ:WABC), worth close to $2.6 million, accounting for less than 0.1%% of its total 13F portfolio. Sitting at the No. 2 spot is Renaissance Technologies, which holds a $2.6 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Some other hedge funds and institutional investors that hold long positions comprise John Overdeck and David Siegel's Two Sigma Advisors, Dmitry Balyasny's Balyasny Asset Management and Israel Englander's Millennium Management. In terms of the portfolio weights assigned to each position Balyasny Asset Management allocated the biggest weight to WestAmerica Bancorp. (NASDAQ:WABC), around 0.01% of its 13F portfolio. Laurion Capital Management is also relatively very bullish on the stock, designating 0.0035 percent of its 13F equity portfolio to WABC.
Because WestAmerica Bancorp. (NASDAQ:WABC) has witnessed bearish sentiment from hedge fund managers, it's easy to see that there were a few fund managers that decided to sell off their full holdings last quarter. Interestingly, Peter Rathjens, Bruce Clarke and John Campbell's Arrowstreet Capital sold off the biggest investment of the "upper crust" of funds watched by Insider Monkey, worth an estimated $2.2 million in stock, and Paul Tudor Jones's Tudor Investment Corp was right behind this move, as the fund cut about $0.9 million worth. These bearish behaviors are interesting, as total hedge fund interest fell by 3 funds last quarter.
Let's check out hedge fund activity in other stocks - not necessarily in the same industry as WestAmerica Bancorp. (NASDAQ:WABC) but similarly valued. These stocks are Studio City International Holdings Limited (NYSE:MSC), Apache Corporation (NASDAQ:APA), Bandwidth Inc. (NASDAQ:BAND), and Cleveland-Cliffs Inc (NYSE:CLF). This group of stocks' market values are closest to WABC's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position MSC,3,244275,-1 APA,35,142310,1 BAND,33,195011,15 CLF,23,77492,-8 Average,23.5,164772,1.75 [/table]
As you can see these stocks had an average of 23.5 hedge funds with bullish positions and the average amount invested in these stocks was $165 million. That figure was $8 million in WABC's case. Apache Corporation (NASDAQ:APA) is the most popular stock in this table. On the other hand Studio City International Holdings Limited (NYSE:MSC) is the least popular one with only 3 bullish hedge fund positions. WestAmerica Bancorp. (NASDAQ:WABC) is not the least popular stock in this group but hedge fund interest is still below average. 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 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 12.2% in 2020 through June 17th and surpassed the market by 14.8 percentage points. Unfortunately WABC wasn't nearly as popular as these 10 stocks (hedge fund sentiment was quite bearish); WABC investors were disappointed as the stock returned -6.2% during the second quarter and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.
