Hedge Funds Are Betting On Northwest Bancshares, Inc. (NWBI)

Hedge funds and other investment firms run by legendary investors like Israel Englander and Ray Dalio are entrusted to manage billions of dollars of accredited investors’ money because they are without peer in the resources they use to identify the best investments for their chosen investment horizon. Moreover, they are more willing to invest a greater amount of their resources in small-cap stocks than big brokerage houses, and this is often where they generate their outperformance, which is why we pay particular attention to their best ideas in this space.

Is Northwest Bancshares, Inc. (NASDAQ:NWBI) a marvelous stock to buy now? Investors who are in the know are surely buying. The number of bullish hedge fund positions that are disclosed in regulatory 13F filings swelled by 1 recently. There were 8 hedge funds in our database with NWBI holdings at the end of the 2016 third quarter. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Government Properties Income Trust (NYSE:GOV), Pennsylvania R.E.I.T. (NYSE:PEI), and WD-40 Company (NASDAQ:WDFC) to gather more data points.

We care about hedge fund sentiment because historically hedge funds’ stock picks delivered strong risk adjusted returns. There are certain segments of the market where hedge funds’ stock picks performed much better than its benchmarks. For instance, the 30 most popular mid-cap stocks among the best performing hedge funds returned 18% over the last 12 months outpacing S&P 500 Index by more than 10 percentage points. We developed this strategy 2.5 years ago and started sharing its picks in our quarterly newsletter. It bested the S&P 500 Index ETFs by delivering a solid 39% vs. 22% gain for its benchmarks.

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Now, let’s take a look at the latest action surrounding Northwest Bancshares, Inc. (NASDAQ:NWBI).

Hedge fund activity in Northwest Bancshares, Inc. (NASDAQ:NWBI)

At Q3’s end, a total of 8 of the hedge funds tracked by Insider Monkey were long this stock, a boost of 14% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards NWBI over the last 5 quarters. With hedgies’ positions undergoing their usual ebb and flow, there exists an “upper tier” of key hedge fund managers who were upping their stakes significantly (or already accumulated large positions).

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Renaissance Technologies, one of the largest hedge funds in the world, has the largest position in Northwest Bancshares, Inc. (NASDAQ:NWBI), worth close to $28.8 million, amounting to 0.1% of its total 13F portfolio. Coming in second is Ken Griffin of Citadel Investment Group, with a $4.3 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 are bullish include Cliff Asness’s AQR Capital Management, David E. Shaw’s D E Shaw and John Overdeck and David Siegel’s Two Sigma Advisors. We should note that none of these hedge funds are among our list of the 100 best performing hedge funds which is based on the performance of their 13F long positions in non-microcap stocks.

Now, key hedge funds were breaking ground themselves. Tudor Investment Corp, led by Paul Tudor Jones, established the biggest position in Northwest Bancshares, Inc. (NASDAQ:NWBI). According to regulatory filings, the fund had $0.5 million invested in the company at the end of the quarter. Matthew Hulsizer’s PEAK6 Capital Management also made a $0.1 million investment in the stock during the quarter.

Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Northwest Bancshares, Inc. (NASDAQ:NWBI) but similarly valued. We will take a look at Government Properties Income Trust (NYSE:GOV), Pennsylvania R.E.I.T. (NYSE:PEI), WD-40 Company (NASDAQ:WDFC), and Portfolio Recovery Associates, Inc. (NASDAQ:PRAA). This group of stocks’ market valuations are closest to NWBI’s market valuation.

As you can see these stocks had an average of 8 hedge funds with bullish positions and the average amount invested in these stocks was $80 million. That figure was $36 million in NWBI’s case. Pennsylvania R.E.I.T. (NYSE:PEI) is the most popular stock in this table. On the other hand Government Properties Income Trust (NYSE:GOV) is the least popular one with only 6 bullish hedge fund positions. Northwest Bancshares, Inc. (NASDAQ:NWBI) 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. In this regard PEI might be a better candidate to consider taking a long position in.

Disclosure: None