Hedge Funds Are Souring On West Pharmaceutical Services Inc. (WST)

Last year we predicted the arrival of the first US recession since 2009 and we told in advance 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 West Pharmaceutical Services Inc. (NYSE:WST).

Is West Pharmaceutical Services Inc. (NYSE:WST) a marvelous investment right now? The best stock pickers were taking a bearish view. The number of long hedge fund positions decreased by 2 in recent months. West Pharmaceutical Services Inc. (NYSE:WST) was in 29 hedge funds’ portfolios at the end of September. The all time high for this statistic is 41. Our calculations also showed that WST isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings).

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium prices have more than doubled over the past year, so 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. With all of this in mind let’s check out the fresh hedge fund action surrounding West Pharmaceutical Services Inc. (NYSE:WST).

Israel Englander of Millennium Management

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

Heading into the fourth quarter of 2021, a total of 29 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -6% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards WST over the last 25 quarters. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

More specifically, Arrowstreet Capital was the largest shareholder of West Pharmaceutical Services Inc. (NYSE:WST), with a stake worth $218.7 million reported as of the end of September. Trailing Arrowstreet Capital was Fisher Asset Management, which amassed a stake valued at $120.2 million. Marshall Wace LLP, Intermede Investment Partners, 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 Navellier & Associates allocated the biggest weight to West Pharmaceutical Services Inc. (NYSE:WST), around 2.73% of its 13F portfolio. Intermede Investment Partners is also relatively very bullish on the stock, earmarking 2.16 percent of its 13F equity portfolio to WST.

Due to the fact that West Pharmaceutical Services Inc. (NYSE:WST) has experienced a decline in interest from the aggregate hedge fund industry, logic holds that there was a specific group of fund managers who sold off their positions entirely heading into Q4. It’s worth mentioning that Ben Levine, Andrew Manuel and Stefan Renold’s LMR Partners said goodbye to the biggest investment of the “upper crust” of funds watched by Insider Monkey, totaling close to $2 million in stock, and Donald Sussman’s Paloma Partners was right behind this move, as the fund dumped about $1.6 million worth. These transactions are intriguing to say the least, as total hedge fund interest fell by 2 funds heading into Q4.

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as West Pharmaceutical Services Inc. (NYSE:WST) but similarly valued. We will take a look at Liberty Broadband Corp (NASDAQ:LBRDK), LyondellBasell Industries NV (NYSE:LYB), Brown-Forman Corporation (NYSE:BF), MongoDB, Inc. (NASDAQ:MDB), Corning Incorporated (NYSE:GLW), Fomento Económico Mexicano, S.A.B. de C.V. (NYSE:FMX), and Ferguson plc (NYSE:FERG). All of these stocks’ market caps match WST’s market cap.

View table here if you experience formatting issues.

As you can see these stocks had an average of 34.7 hedge funds with bullish positions and the average amount invested in these stocks was $2741 million. That figure was $795 million in WST’s case. Liberty Broadband Corp (NASDAQ:LBRDK) is the most popular stock in this table. On the other hand Ferguson plc (NYSE:FERG) is the least popular one with only 10 bullish hedge fund positions. West Pharmaceutical Services Inc. (NYSE:WST) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for WST is 42.1. 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 negative signal and 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 28.6% in 2021 through November 30th and surpassed the market again by 5.6 percentage points. Unfortunately WST wasn’t nearly as popular as these 5 stocks (hedge fund sentiment was quite bearish); WST investors were disappointed as the stock returned 4.3% since the end of September (through 11/30) 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 in 2021.

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