We hate to say this but, we told you so. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW and predicted a US recession when the S&P 500 Index was trading at the 3150 level. We also told you to short the market and buy long-term Treasury bonds. Our article also called for a total international travel ban. While we were warning you, President Trump minimized the threat and failed to act promptly. As a result of his inaction, we will now experience a deeper recession (see why hell is coming).
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. Insider Monkey has processed numerous 13F filings of hedge funds and successful value investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds’ and successful investors’ positions as of the end of the fourth quarter. You can find articles about an individual hedge fund’s trades on numerous financial news websites. However, in this article we will take a look at their collective moves over the last 4 years and analyze what the smart money thinks of WesBanco, Inc. (NASDAQ:WSBC) based on that data.
WesBanco, Inc. (NASDAQ:WSBC) shares haven’t seen a lot of action during the fourth quarter. Overall, hedge fund sentiment was unchanged. The stock was in 11 hedge funds’ portfolios at the end of December. 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 National Vision Holdings, Inc. (NASDAQ:EYE), Endava plc (NYSE:DAVA), and Lattice Semiconductor Corporation (NASDAQ:LSCC) to gather more data points. Our calculations also showed that WSBC isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of this article for Q3 rankings).
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 41 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
We leave no stone unturned when looking for the next great investment idea. For example, we believe electric vehicles and energy storage are set to become giant markets, and we want to take advantage of the declining lithium prices amid the COVID-19 pandemic. So we are checking out investment opportunities like this one. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind let’s take a look at the key hedge fund action encompassing WesBanco, Inc. (NASDAQ:WSBC).
What have hedge funds been doing with WesBanco, Inc. (NASDAQ:WSBC)?
At the end of the fourth quarter, a total of 11 of the hedge funds tracked by Insider Monkey were long this stock, a change of 0% from one quarter earlier. By comparison, 5 hedge funds held shares or bullish call options in WSBC 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.
The largest stake in WesBanco, Inc. (NASDAQ:WSBC) was held by Renaissance Technologies, which reported holding $35.3 million worth of stock at the end of September. It was followed by Basswood Capital with a $8.4 million position. Other investors bullish on the company included Millennium Management, Citadel Investment Group, and Two Sigma Advisors. In terms of the portfolio weights assigned to each position Basswood Capital allocated the biggest weight to WesBanco, Inc. (NASDAQ:WSBC), around 0.59% of its 13F portfolio. Sciencast Management is also relatively very bullish on the stock, dishing out 0.06 percent of its 13F equity portfolio to WSBC.
Seeing as WesBanco, Inc. (NASDAQ:WSBC) has experienced bearish sentiment from hedge fund managers, logic holds that there exists a select few funds who were dropping their full holdings heading into Q4. At the top of the heap, Paul Marshall and Ian Wace’s Marshall Wace LLP said goodbye to the biggest stake of all the hedgies watched by Insider Monkey, comprising close to $7.2 million in stock, and Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital was right behind this move, as the fund said goodbye to about $2.6 million worth. These transactions are important to note, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).
Let’s now review hedge fund activity in other stocks similar to WesBanco, Inc. (NASDAQ:WSBC). We will take a look at National Vision Holdings, Inc. (NASDAQ:EYE), Endava plc (NYSE:DAVA), Lattice Semiconductor Corporation (NASDAQ:LSCC), and Vermilion Energy Inc (NYSE:VET). All of these stocks’ market caps match WSBC’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| EYE | 15 | 387263 | -10 |
| DAVA | 7 | 59418 | 2 |
| LSCC | 32 | 281293 | 5 |
| VET | 8 | 42512 | -2 |
| Average | 15.5 | 192622 | -1.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 15.5 hedge funds with bullish positions and the average amount invested in these stocks was $193 million. That figure was $57 million in WSBC’s case. Lattice Semiconductor Corporation (NASDAQ:LSCC) is the most popular stock in this table. On the other hand Endava plc (NYSE:DAVA) is the least popular one with only 7 bullish hedge fund positions. WesBanco, Inc. (NASDAQ:WSBC) 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. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks lost 13.0% in 2020 through April 6th but beat the market by 4.2 percentage points. Unfortunately WSBC wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); WSBC investors were disappointed as the stock returned -38.3% during the same time period and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.
