At Insider Monkey, we pore over the filings of nearly 873 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 June 30th. In this article, we will use that wealth of knowledge to determine whether or not Great Western Bancorp Inc (NYSE:GWB) makes for a good investment right now.
Is Great Western Bancorp Inc (NYSE:GWB) a cheap stock to buy now? Money managers were taking a pessimistic view. The number of bullish hedge fund positions were trimmed by 3 in recent months. Great Western Bancorp Inc (NYSE:GWB) was in 10 hedge funds’ portfolios at the end of the second quarter of 2021. The all time high for this statistic is 24. Our calculations also showed that GWB isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings). There were 13 hedge funds in our database with GWB holdings at the end of March.
Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by 79 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 underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.
Matthew Lindenbaum of Basswood Capital
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. We go through lists like the 10 best EV 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. With all of this in mind let’s take a peek at the fresh hedge fund action encompassing Great Western Bancorp Inc (NYSE:GWB).
Do Hedge Funds Think GWB Is A Good Stock To Buy Now?
At the end of the second quarter, a total of 10 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -23% from the first quarter of 2020. The graph below displays the number of hedge funds with bullish position in GWB over the last 24 quarters. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Basswood Capital was the largest shareholder of Great Western Bancorp Inc (NYSE:GWB), with a stake worth $6.5 million reported as of the end of June. Trailing Basswood Capital was D E Shaw, which amassed a stake valued at $2.8 million. Two Sigma Advisors, Millennium Management, and Royce & Associates 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 Quantinno Capital allocated the biggest weight to Great Western Bancorp Inc (NYSE:GWB), around 0.32% of its 13F portfolio. Basswood Capital is also relatively very bullish on the stock, dishing out 0.27 percent of its 13F equity portfolio to GWB.
Judging by the fact that Great Western Bancorp Inc (NYSE:GWB) has experienced falling interest from the aggregate hedge fund industry, it’s safe to say that there is a sect of fund managers that slashed their entire stakes heading into Q3. At the top of the heap, Ken Griffin’s Citadel Investment Group dropped the largest investment of all the hedgies tracked by Insider Monkey, worth an estimated $10.4 million in stock, and Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital was right behind this move, as the fund dropped about $2.5 million worth. These moves are important to note, as aggregate hedge fund interest dropped by 3 funds heading into Q3.
Let’s now review hedge fund activity in other stocks similar to Great Western Bancorp Inc (NYSE:GWB). We will take a look at CVR Energy, Inc. (NYSE:CVI), WideOpenWest, Inc. (NYSE:WOW), Yext, Inc. (NYSE:YEXT), Argo Group International Holdings, Ltd. (NYSE:ARGO), Core Laboratories N.V. (NYSE:CLB), Lindsay Corporation (NYSE:LNN), and QAD Inc. (NASDAQ:QADA). This group of stocks’ market valuations are similar to GWB’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| CVI | 16 | 1348329 | -2 |
| WOW | 19 | 296125 | 5 |
| YEXT | 19 | 54134 | 6 |
| ARGO | 12 | 230220 | -1 |
| CLB | 16 | 238361 | -1 |
| LNN | 14 | 215504 | 4 |
| QADA | 23 | 230920 | 9 |
| Average | 17 | 373370 | 2.9 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 17 hedge funds with bullish positions and the average amount invested in these stocks was $373 million. That figure was $14 million in GWB’s case. QAD Inc. (NASDAQ:QADA) is the most popular stock in this table. On the other hand Argo Group International Holdings, Ltd. (NYSE:ARGO) is the least popular one with only 12 bullish hedge fund positions. Compared to these stocks Great Western Bancorp Inc (NYSE:GWB) is even less popular than ARGO. Our overall hedge fund sentiment score for GWB is 14.5. 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. Hedge funds dodged a bullet by taking a bearish stance towards GWB. Our calculations showed that the top 5 most popular hedge fund stocks returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 25.7% in 2021 through September 27th but managed to beat the market again by 6.2 percentage points. Unfortunately GWB wasn’t nearly as popular as these 5 stocks (hedge fund sentiment was very bearish); GWB investors were disappointed as the stock returned -0.9% since the end of the second quarter (through 9/27) 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 most of these stocks already outperformed the market since 2019.
Follow Great Western Bancorp Inc. (NYSE:GWB)
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Disclosure: None. This article was originally published at Insider Monkey.
