Hedge Funds Are Nibbling On Western Alliance Bancorporation (WAL)

In this article we will check out the progression of hedge fund sentiment towards Western Alliance Bancorporation (NYSE:WAL) and determine whether it is a good investment right now. We at Insider Monkey like to examine what billionaires and hedge funds think of a company before spending days of research on it. Given their 2 and 20 payment structure, hedge funds have more incentives and resources than the average investor. The funds have access to expert networks and get tips from industry insiders. They also employ numerous Ivy League graduates and MBAs. Like everyone else, hedge funds perform miserably at times, but their consensus picks have historically outperformed the market after risk adjustments.

Is Western Alliance Bancorporation (NYSE:WAL) a buy, sell, or hold? Hedge funds were betting on the stock. The number of bullish hedge fund positions inched up by 1 in recent months. Western Alliance Bancorporation (NYSE:WAL) was in 23 hedge funds’ portfolios at the end of the first quarter of 2021. The all time high for this statistic is 34. Our calculations also showed that WAL isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings).

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 115 percentage points since March 2017 (see the details here). That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Matthew Lindenbaum of Basswood Capital

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, Chuck Schumer recently stated that marijuana legalization will be a Senate priority. So, we are checking out this under the radar stock that will benefit from this. We go through lists like the 10 best battery stocks to pick the next Tesla that will deliver a 10x return. 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 homepage. Now we’re going to analyze the latest hedge fund action encompassing Western Alliance Bancorporation (NYSE:WAL).

Do Hedge Funds Think WAL Is A Good Stock To Buy Now?

At the end of the first quarter, a total of 23 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 5% from one quarter earlier. By comparison, 27 hedge funds held shares or bullish call options in WAL a year ago. With the smart money’s capital changing hands, there exists a select group of key hedge fund managers who were increasing their stakes substantially (or already accumulated large positions).

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Richard Driehaus’s Driehaus Capital has the biggest position in Western Alliance Bancorporation (NYSE:WAL), worth close to $20.2 million, accounting for 0.3% of its total 13F portfolio. Sitting at the No. 2 spot is Carlson Capital, managed by Clint Carlson, which holds a $17.6 million position; the fund has 0.7% of its 13F portfolio invested in the stock. Other professional money managers that are bullish include Ryan Tolkin (CIO)’s Schonfeld Strategic Advisors, Cliff Asness’s AQR Capital Management and Matthew Lindenbaum’s Basswood Capital. In terms of the portfolio weights assigned to each position Global Frontier Investments allocated the biggest weight to Western Alliance Bancorporation (NYSE:WAL), around 9.76% of its 13F portfolio. Elizabeth Park Capital Management is also relatively very bullish on the stock, setting aside 3.45 percent of its 13F equity portfolio to WAL.

As aggregate interest increased, key hedge funds have been driving this bullishness. Carlson Capital, managed by Clint Carlson, initiated the most valuable position in Western Alliance Bancorporation (NYSE:WAL). Carlson Capital had $17.6 million invested in the company at the end of the quarter. Ryan Tolkin (CIO)’s Schonfeld Strategic Advisors also made a $14.5 million investment in the stock during the quarter. The following funds were also among the new WAL investors: George Soros’s Soros Fund Management, Daniel Johnson’s Gillson Capital, and Ken Grossman and Glen Schneider’s SG Capital Management.

Let’s check out hedge fund activity in other stocks similar to Western Alliance Bancorporation (NYSE:WAL). We will take a look at McAfee Corp. (NASDAQ:MCFE), ContextLogic Inc. (NASDAQ:WISH), Bruker Corporation (NASDAQ:BRKR), Arrival (NASDAQ:ARVL), CF Industries Holdings, Inc. (NYSE:CF), Americold Realty Trust (NYSE:COLD), and Coca-Cola FEMSA, S.A.B. de C.V. (NYSE:KOF). This group of stocks’ market caps are closest to WAL’s market cap.

View table here if you experience formatting issues.

As you can see these stocks had an average of 21.1 hedge funds with bullish positions and the average amount invested in these stocks was $421 million. That figure was $141 million in WAL’s case. CF Industries Holdings, Inc. (NYSE:CF) is the most popular stock in this table. On the other hand Coca-Cola FEMSA, S.A.B. de C.V. (NYSE:KOF) is the least popular one with only 10 bullish hedge fund positions. Western Alliance Bancorporation (NYSE:WAL) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for WAL is 45.4. 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. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 23.8% in 2021 through July 16th and beat the market again by 7.7 percentage points. Unfortunately WAL wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on WAL were disappointed as the stock returned 0.2% since the end of March (through 7/16) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as many of these stocks already outperformed the market since 2019.

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Disclosure: None. This article was originally published at Insider Monkey.