We are still in an overall bull market and many stocks that smart money investors were piling into surged through October 17th. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained 45% and 39% respectively. Hedge funds’ top 3 stock picks returned 34.4% this year and beat the S&P 500 ETFs by 13 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 Great Western Bancorp Inc (NYSE:GWB).
Is Great Western Bancorp Inc (NYSE:GWB) a superb investment right now? Investors who are in the know are taking a pessimistic view. The number of bullish hedge fund positions fell by 5 lately. Our calculations also showed that GWB isn’t among the 30 most popular stocks among hedge funds (view the video below). GWB was in 9 hedge funds’ portfolios at the end of June. There were 14 hedge funds in our database with GWB positions at the end of the previous quarter.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
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 market by 40 percentage points since May 2014 through May 30, 2019 (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.
Unlike former hedge manager, Dr. Steve Sjuggerud, who is convinced Dow will soar past 40000, our long-short investment strategy doesn’t rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. We’re going to take a look at the new hedge fund action encompassing Great Western Bancorp Inc (NYSE:GWB).
What have hedge funds been doing with Great Western Bancorp Inc (NYSE:GWB)?
Heading into the third quarter of 2019, a total of 9 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -36% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards GWB over the last 16 quarters. With hedgies’ positions undergoing their usual ebb and flow, there exists a select group of noteworthy hedge fund managers who were upping their stakes significantly (or already accumulated large positions).
Of the funds tracked by Insider Monkey, Jim Simons’s Renaissance Technologies has the biggest position in Great Western Bancorp Inc (NYSE:GWB), worth close to $15.3 million, accounting for less than 0.1%% of its total 13F portfolio. The second largest stake is held by AQR Capital Management, led by Cliff Asness, holding a $6.7 million position; less than 0.1%% of its 13F portfolio is allocated to the company. Remaining members of the smart money that are bullish consist of Paul Marshall and Ian Wace’s Marshall Wace LLP, D. E. Shaw’s D E Shaw and Noam Gottesman’s GLG Partners.
Due to the fact that Great Western Bancorp Inc (NYSE:GWB) has witnessed falling interest from the entirety of the hedge funds we track, it’s easy to see that there is a sect of hedge funds who were dropping their entire stakes by the end of the second quarter. It’s worth mentioning that Israel Englander’s Millennium Management dumped the largest position of the 750 funds tracked by Insider Monkey, comprising about $11.4 million in stock, and Paul Tudor Jones’s Tudor Investment Corp was right behind this move, as the fund said goodbye to about $0.9 million worth. These transactions are interesting, as aggregate hedge fund interest was cut by 5 funds by the end of the second quarter.
Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Great Western Bancorp Inc (NYSE:GWB) but similarly valued. These stocks are NetScout Systems, Inc. (NASDAQ:NTCT), Colony Credit Real Estate, Inc. (NYSE:CLNC), Steelcase Inc. (NYSE:SCS), and Acacia Communications, Inc. (NASDAQ:ACIA). All of these stocks’ market caps are similar to GWB’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| NTCT | 14 | 118278 | 2 |
| CLNC | 8 | 21487 | 2 |
| SCS | 19 | 71817 | -5 |
| ACIA | 28 | 295932 | -3 |
| Average | 17.25 | 126879 | -1 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 17.25 hedge funds with bullish positions and the average amount invested in these stocks was $127 million. That figure was $42 million in GWB’s case. Acacia Communications, Inc. (NASDAQ:ACIA) is the most popular stock in this table. On the other hand Colony Credit Real Estate, Inc. (NYSE:CLNC) is the least popular one with only 8 bullish hedge fund positions. Great Western Bancorp Inc (NYSE:GWB) 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 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Unfortunately GWB wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); GWB investors were disappointed as the stock returned -6.7% during the third quarter 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 in 2019.
Disclosure: None. This article was originally published at Insider Monkey.
