We are still in an overall bull market and many stocks that smart money investors were piling into surged through the end of November. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained 54% and 51% respectively. Hedge funds’ top 3 stock picks returned 41.7% this year and beat the S&P 500 ETFs by 14 percentage points. Investing in index funds guarantees you average returns, not superior returns. We are looking to generate superior returns for our readers. That’s why we believe it isn’t a waste of time to check out hedge fund sentiment before you invest in a stock like East West Bancorp, Inc. (NASDAQ:EWBC).
East West Bancorp, Inc. (NASDAQ:EWBC) was in 27 hedge funds’ portfolios at the end of the third quarter of 2019. EWBC has seen a decrease in hedge fund interest lately. There were 28 hedge funds in our database with EWBC positions at the end of the previous quarter. Our calculations also showed that EWBC isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings).
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that hedge funds’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the Russell 2000 ETFs by 40 percentage points since May 2014 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 27.8% through November 21, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
John Overdeck of Two Sigma Advisors
Unlike the largest US hedge funds that are convinced Dow will soar past 40,000 or the world’s most bearish hedge fund that’s more convinced than ever that a crash is coming, our long-short investment strategy doesn’t rely on bull or bear markets to deliver double digit returns. We only rely on the best performing hedge funds‘ buy/sell signals. We’re going to take a glance at the new hedge fund action regarding East West Bancorp, Inc. (NASDAQ:EWBC).
How are hedge funds trading East West Bancorp, Inc. (NASDAQ:EWBC)?
At the end of the third quarter, a total of 27 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -4% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards EWBC over the last 17 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, Ken Fisher’s Fisher Asset Management has the largest position in East West Bancorp, Inc. (NASDAQ:EWBC), worth close to $84.7 million, accounting for 0.1% of its total 13F portfolio. Sitting at the No. 2 spot is Citadel Investment Group, managed by Ken Griffin, which holds a $54.4 million position; less than 0.1%% of its 13F portfolio is allocated to the company. Some other professional money managers with similar optimism include John Overdeck and David Siegel’s Two Sigma Advisors, David E. Shaw’s D E Shaw and Phill Gross and Robert Atchinson’s Adage Capital Management. In terms of the portfolio weights assigned to each position Basswood Capital allocated the biggest weight to East West Bancorp, Inc. (NASDAQ:EWBC), around 1.42% of its portfolio. Algert Coldiron Investors is also relatively very bullish on the stock, earmarking 0.9 percent of its 13F equity portfolio to EWBC.
Due to the fact that East West Bancorp, Inc. (NASDAQ:EWBC) has experienced falling interest from the aggregate hedge fund industry, logic holds that there exists a select few hedge funds who were dropping their full holdings heading into Q4. It’s worth mentioning that George Soros’s Soros Fund Management dropped the biggest stake of all the hedgies followed by Insider Monkey, comprising about $6.7 million in stock, and Michael Kharitonov and Jon David McAuliffe’s Voleon Capital was right behind this move, as the fund cut about $2.6 million worth. These bearish behaviors are intriguing to say the least, as total hedge fund interest dropped by 1 funds heading into Q4.
Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as East West Bancorp, Inc. (NASDAQ:EWBC) but similarly valued. We will take a look at Watsco Inc (NYSE:WSO), HubSpot Inc (NYSE:HUBS), Momo Inc (NASDAQ:MOMO), and Israel Chemicals Ltd. (NYSE:ICL). All of these stocks’ market caps match EWBC’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| WSO | 18 | 138904 | -4 |
| HUBS | 34 | 820740 | 1 |
| MOMO | 27 | 827296 | 5 |
| ICL | 5 | 21431 | -1 |
| Average | 21 | 452093 | 0.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 21 hedge funds with bullish positions and the average amount invested in these stocks was $452 million. That figure was $427 million in EWBC’s case. HubSpot Inc (NYSE:HUBS) is the most popular stock in this table. On the other hand Israel Chemicals Ltd. (NYSE:ICL) is the least popular one with only 5 bullish hedge fund positions. East West Bancorp, Inc. (NASDAQ:EWBC) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but 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 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately EWBC wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on EWBC were disappointed as the stock returned 4.1% during the fourth quarter (through the end of November) 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 many of these stocks already outperformed the market so far this year.
Disclosure: None. This article was originally published at Insider Monkey.
