Coronavirus is probably the #1 concern in investors’ minds right now. It should be. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW. We predicted that a US recession is imminent and US stocks will go down by at least 20% in the next 3-6 months. We also told you to short the market ETFs and buy long-term bonds. Investors who agreed with us and replicated these trades are up double digits whereas the market is down double digits. Our article also called for a total international travel ban to prevent the spread of the coronavirus especially from Europe. We were one step ahead of the markets and the president (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. At Insider Monkey, we pore over the filings of nearly 835 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 December 31. In this article, we will use that wealth of knowledge to determine whether or not WSFS Financial Corporation (NASDAQ:WSFS) makes for a good investment right now.
WSFS Financial Corporation (NASDAQ:WSFS) shareholders have witnessed an increase in support from the world’s most elite money managers recently. WSFS was in 16 hedge funds’ portfolios at the end of the fourth quarter of 2019. There were 11 hedge funds in our database with WSFS holdings at the end of the previous quarter. Our calculations also showed that WSFS 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).
To most investors, hedge funds are assumed to be worthless, outdated investment tools of yesteryear. While there are more than 8000 funds in operation at the moment, Our researchers choose to focus on the upper echelon of this club, around 850 funds. These money managers manage most of the smart money’s total capital, and by paying attention to their first-class equity investments, Insider Monkey has figured out a number of investment strategies that have historically outperformed Mr. Market. Insider Monkey’s flagship short hedge fund strategy outrun the S&P 500 short ETFs by around 20 percentage points annually since its inception in March 2017. Our portfolio of short stocks lost 35.3% since February 2017 (through March 3rd) even though the market was up more than 35% during the same period. We just shared a list of 7 short targets in our latest quarterly update .
Richard S. Pzena of Pzena Investment Management
We leave no stone unturned when looking for the next great investment idea. For example we recently identified a stock that trades 25% below the net cash on its balance sheet. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences, and go through short-term trade recommendations like this one. We even check out the recommendations of services with hard to believe track records. 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 view the recent hedge fund action surrounding WSFS Financial Corporation (NASDAQ:WSFS).
How have hedgies been trading WSFS Financial Corporation (NASDAQ:WSFS)?
At Q4’s end, a total of 16 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 45% from the third quarter of 2019. The graph below displays the number of hedge funds with bullish position in WSFS over the last 18 quarters. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Renaissance Technologies, holds the number one position in WSFS Financial Corporation (NASDAQ:WSFS). Renaissance Technologies has a $95.1 million position in the stock, comprising 0.1% of its 13F portfolio. Coming in second is Pzena Investment Management, led by Richard S. Pzena, holding a $33.4 million position; the fund has 0.2% of its 13F portfolio invested in the stock. Some other hedge funds and institutional investors with similar optimism encompass Chuck Royce’s Royce & Associates, Israel Englander’s Millennium Management and Tim Mullen’s Swift Run Capital Management. In terms of the portfolio weights assigned to each position Swift Run Capital Management allocated the biggest weight to WSFS Financial Corporation (NASDAQ:WSFS), around 3.9% of its 13F portfolio. Royce & Associates is also relatively very bullish on the stock, earmarking 0.26 percent of its 13F equity portfolio to WSFS.
Consequently, specific money managers were breaking ground themselves. Millennium Management, managed by Israel Englander, initiated the most outsized position in WSFS Financial Corporation (NASDAQ:WSFS). Millennium Management had $8.5 million invested in the company at the end of the quarter. Donald Sussman’s Paloma Partners also initiated a $0.8 million position during the quarter. The other funds with new positions in the stock are Minhua Zhang’s Weld Capital Management, Karim Abbadi and Edward McBride’s Centiva Capital, and Matthew L Pinz’s Pinz Capital.
Let’s also examine hedge fund activity in other stocks similar to WSFS Financial Corporation (NASDAQ:WSFS). These stocks are Sprouts Farmers Market Inc (NASDAQ:SFM), Greif, Inc. (NYSE:GEF), Inter Parfums, Inc. (NASDAQ:IPAR), and Kosmos Energy Ltd (NYSE:KOS). All of these stocks’ market caps match WSFS’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| SFM | 30 | 331285 | 4 |
| GEF | 18 | 87008 | 3 |
| IPAR | 15 | 67320 | 1 |
| KOS | 30 | 133090 | 5 |
| Average | 23.25 | 154676 | 3.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 23.25 hedge funds with bullish positions and the average amount invested in these stocks was $155 million. That figure was $175 million in WSFS’s case. Sprouts Farmers Market Inc (NASDAQ:SFM) is the most popular stock in this table. On the other hand Inter Parfums, Inc. (NASDAQ:IPAR) is the least popular one with only 15 bullish hedge fund positions. WSFS Financial Corporation (NASDAQ:WSFS) 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 17.4% in 2020 through March 25th but beat the market by 5.5 percentage points. Unfortunately WSFS wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); WSFS investors were disappointed as the stock returned -47.8% 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 Q1.
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.
