Hedge Funds Aren’t Crazy About Webster Financial Corporation (WBS) Anymore

It is already common knowledge that individual investors do not usually have the necessary resources and abilities to properly research an investment opportunity. As a result, most investors pick their illusory “winners” by making a superficial analysis and research that leads to poor performance on aggregate. The Standard and Poor’s 500 Index returned 7.6% over the 12-month period ending November 21, while more than 51% of the constituents of the index underperformed the benchmark. Hence, a random stock picking process will most likely lead to disappointment. At the same time, the 30 most favored mid-cap stocks by the best performing hedge funds monitored by Insider Monkey generated a return of 18% over the same time span. Of course, hedge funds do make wrong bets on some occasions and these get disproportionately publicized on financial media, but piggybacking their moves can beat the broader market on average. That’s why we are going to go over recent hedge fund activity in Webster Financial Corporation (NYSE:WBS).

Is Webster Financial Corporation (NYSE:WBS) going to take off soon? Investors who are in the know are surely in a pessimistic mood. The number of bullish hedge fund positions that are disclosed in regulatory 13F filings decreased by 2 in recent months. WBSwas in 13 hedge funds’ portfolios at the end of September. There were 15 hedge funds in our database with WBS holdings at the end of the previous 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 Tallgrass Energy Partners LP(NYSE:TEP), Legg Mason, Inc. (NYSE:LM), and Corelogic Inc (NYSE:CLGX) to gather more data points.

At Insider Monkey, we’ve developed an investment strategy that has delivered market-beating returns over the past 12 months. Our strategy identifies the 100 best-performing funds of the previous quarter from among the collection of 700+ successful funds that we track in our database, which we accomplish using our returns methodology. We then study the portfolios of those 100 funds using the latest 13F data to uncover the 30 most popular mid-cap stocks (market caps of between $1 billion and $10 billion) among them to hold until the next filing period. This strategy delivered 18% gains over the past 12 months, more than doubling the 8% returns enjoyed by the S&P 500 ETFs.

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With all of this in mind, we’re going to take a peek at the key action regarding Webster Financial Corporation (NYSE:WBS).

What have hedge funds been doing with Webster Financial Corporation (NYSE:WBS)?

Heading into the fourth quarter of 2016, a total of 13 of the hedge funds tracked by Insider Monkey held long positions in this stock, a drop of 13% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards WBS over the last 5 quarters. With hedge funds’ positions undergoing their usual ebb and flow, there exists a few key hedge fund managers who were increasing their stakes substantially (or already accumulated large positions).

When looking at the institutional investors followed by Insider Monkey, Ken Fisher’s Fisher Asset Management has the number one position in Webster Financial Corporation (NYSE:WBS), worth close to $97.1 million, corresponding to 0.2% of its total 13F portfolio. Sitting at the No. 2 spot is Pzena Investment Management, led by Richard S. Pzena, which holds a $73.5 million position; 0.4% of its 13F portfolio is allocated to the company. Other peers with similar optimism include Bernard Horn’s Polaris Capital Management, Michael Barnes and Arif Inayatullah’s Tricadia Capital Management and Seth Rosen’s Nitorum Capital. We should note that Nitorum Capital is 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.

We already know that not all hedge funds are bullish on the stock and some hedge funds actually cashed in their positions entirely. At the top of the heap, Will Cook’s Sunriver Management cashed in the largest investment of the “upper crust” of funds followed by Insider Monkey, valued at about $14.5 million in stock. Anton Schutz’s fund, Mendon Capital Advisors, also cut its stock, about $3.4 million worth of WBS shares.

Let’s now take a look at hedge fund activity in other stocks similar to Webster Financial Corporation (NYSE:WBS). These stocks are Tallgrass Energy Partners LP (NYSE:TEP), Legg Mason, Inc. (NYSE:LM), Corelogic Inc (NYSE:CLGX), and Nabors Industries Ltd. (NYSE:NBR). All of these stocks’ market caps are closest to WBS’s market cap.

As you can see these stocks had an average of 20 hedge funds with bullish positions and the average amount invested in these stocks was $341 million. That figure was $224 million in WBS’s case. Nabors Industries Ltd. (NYSE:NBR) is the most popular stock in this table. On the other hand Tallgrass Energy Partners LP (NYSE:TEP) is the least popular one with only 5 bullish hedge fund positions. Webster Financial Corporation (NYSE:WBS) 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 NBR might be a better candidate to consider taking a long position in.

Disclosure: none.