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 900 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 WestAmerica Bancorp. (NASDAQ:WABC).
WestAmerica Bancorp. (NASDAQ:WABC) shareholders have witnessed a decrease in enthusiasm from smart money of late. WestAmerica Bancorp. (NASDAQ:WABC) was in 10 hedge funds’ portfolios at the end of June. The all time high for this statistic is 14. There were 13 hedge funds in our database with WABC positions at the end of the first quarter. Our calculations also showed that WABC isn’t among the 30 most popular stocks among hedge funds (click for Q2 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 79 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.
Cliff Asness of AQR Capital Management
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. Keeping this in mind we’re going to review the recent hedge fund action surrounding WestAmerica Bancorp. (NASDAQ:WABC).
Do Hedge Funds Think WABC 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 long this stock, a change of -23% from one quarter earlier. By comparison, 12 hedge funds held shares or bullish call options in WABC a year ago. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Citadel Investment Group was the largest shareholder of WestAmerica Bancorp. (NASDAQ:WABC), with a stake worth $5.3 million reported as of the end of June. Trailing Citadel Investment Group was Renaissance Technologies, which amassed a stake valued at $3.4 million. Millennium Management, D E Shaw, and AQR Capital Management 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 Winton Capital Management allocated the biggest weight to WestAmerica Bancorp. (NASDAQ:WABC), around 0.11% of its 13F portfolio. Tudor Investment Corp is also relatively very bullish on the stock, earmarking 0.03 percent of its 13F equity portfolio to WABC.
Due to the fact that WestAmerica Bancorp. (NASDAQ:WABC) has witnessed a decline in interest from the aggregate hedge fund industry, logic holds that there exists a select few funds who were dropping their full holdings by the end of the second quarter. At the top of the heap, Paul Marshall and Ian Wace’s Marshall Wace LLP dumped the biggest position of the “upper crust” of funds tracked by Insider Monkey, comprising about $0.6 million in stock, and Dmitry Balyasny’s Balyasny Asset Management was right behind this move, as the fund dumped about $0.5 million worth. These moves are important to note, as aggregate hedge fund interest dropped by 3 funds by the end of the second quarter.
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as WestAmerica Bancorp. (NASDAQ:WABC) but similarly valued. These stocks are Lakeland Financial Corporation (NASDAQ:LKFN), Mack Cali Realty Corp (NYSE:CLI), SecureWorks Corp. (NASDAQ:SCWX), Oceaneering International (NYSE:OII), nLIGHT, Inc. (NASDAQ:LASR), Horace Mann Educators Corporation (NYSE:HMN), and CSG Systems International, Inc. (NASDAQ:CSGS). This group of stocks’ market caps are similar to WABC’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| LKFN | 10 | 10653 | 1 |
| CLI | 17 | 53577 | 9 |
| SCWX | 12 | 37228 | 0 |
| OII | 17 | 100930 | -3 |
| LASR | 14 | 69065 | -4 |
| HMN | 15 | 49487 | 1 |
| CSGS | 23 | 142591 | 0 |
| Average | 15.4 | 66219 | 0.6 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 15.4 hedge funds with bullish positions and the average amount invested in these stocks was $66 million. That figure was $22 million in WABC’s case. CSG Systems International, Inc. (NASDAQ:CSGS) is the most popular stock in this table. On the other hand Lakeland Financial Corporation (NASDAQ:LKFN) is the least popular one with only 10 bullish hedge fund positions. Compared to these stocks WestAmerica Bancorp. (NASDAQ:WABC) is even less popular than LKFN. Our overall hedge fund sentiment score for WABC is 23.4. 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. Hedge funds dodged a bullet by taking a bearish stance towards WABC. 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 WABC wasn’t nearly as popular as these 5 stocks (hedge fund sentiment was very bearish); WABC investors were disappointed as the stock returned -1.6% 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 Westamerica Bancorporation (NASDAQ:WABC)
Follow Westamerica Bancorporation (NASDAQ:WABC)
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Disclosure: None. This article was originally published at Insider Monkey.
