Many investors, including Paul Tudor Jones or Stan Druckenmiller, have been saying before last year’s Q4 market crash that the stock market is overvalued due to a low interest rate environment that leads to companies swapping their equity for debt and focusing mostly on short-term performance such as beating the quarterly earnings estimates. In the first half of 2019, most investors recovered all of their Q4 losses as sentiment shifted and optimism dominated the US China trade negotiations. Nevertheless, many of the stocks that delivered strong returns in the first half still sport strong fundamentals and their gains were more related to the general market sentiment rather than their individual performance and hedge funds kept their bullish stance. In this article we will find out how hedge fund sentiment to Great Western Bancorp Inc (NYSE:GWB) changed recently.
Great Western Bancorp Inc (NYSE:GWB) shareholders have witnessed an increase in support from the world’s most elite money managers in recent months. GWB was in 11 hedge funds’ portfolios at the end of the third quarter of 2019. There were 9 hedge funds in our database with GWB holdings at the end of the previous quarter. Our calculations also showed that GWB 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.
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’ 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.
Cliff Asness of AQR Capital Management
We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world’s largest cannabis market, so we check out this European marijuana stock pitch. One of the most bullish analysts in America just put his money where his mouth is. He says, “I’m investing more today than I did back in early 2009.” So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We also rely on the best performing hedge funds‘ buy/sell signals. We’re going to check out the fresh hedge fund action regarding Great Western Bancorp Inc (NYSE:GWB).
What does smart money think about Great Western Bancorp Inc (NYSE:GWB)?
Heading into the fourth quarter of 2019, a total of 11 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 22% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in GWB over the last 17 quarters. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
According to Insider Monkey’s hedge fund database, Renaissance Technologies has the largest position in Great Western Bancorp Inc (NYSE:GWB), worth close to $14 million, accounting for less than 0.1%% of its total 13F portfolio. On Renaissance Technologies’s heels is Arrowstreet Capital, managed by Peter Rathjens, Bruce Clarke and John Campbell, which holds a $8.8 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Some other peers that are bullish contain Israel Englander’s Millennium Management, Cliff Asness’s AQR Capital Management and David E. Shaw’s D E Shaw. In terms of the portfolio weights assigned to each position Weld Capital Management allocated the biggest weight to Great Western Bancorp Inc (NYSE:GWB), around 0.19% of its 13F portfolio. Arrowstreet Capital is also relatively very bullish on the stock, designating 0.02 percent of its 13F equity portfolio to GWB.
As one would reasonably expect, specific money managers have jumped into Great Western Bancorp Inc (NYSE:GWB) headfirst. Arrowstreet Capital, managed by Peter Rathjens, Bruce Clarke and John Campbell, created the most valuable position in Great Western Bancorp Inc (NYSE:GWB). Arrowstreet Capital had $8.8 million invested in the company at the end of the quarter. Israel Englander’s Millennium Management also initiated a $7.5 million position during the quarter. The following funds were also among the new GWB investors: Minhua Zhang’s Weld Capital Management and Brandon Haley’s Holocene Advisors.
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Great Western Bancorp Inc (NYSE:GWB) but similarly valued. We will take a look at National Vision Holdings, Inc. (NASDAQ:EYE), Colony Credit Real Estate, Inc. (NYSE:CLNC), Minerals Technologies Inc (NYSE:MTX), and The Cheesecake Factory Incorporated (NASDAQ:CAKE). This group of stocks’ market values are similar to GWB’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| EYE | 22 | 344437 | 1 |
| CLNC | 6 | 13571 | -2 |
| MTX | 17 | 107111 | 2 |
| CAKE | 22 | 116362 | -3 |
| Average | 16.75 | 145370 | -0.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 16.75 hedge funds with bullish positions and the average amount invested in these stocks was $145 million. That figure was $46 million in GWB’s case. National Vision Holdings, Inc. (NASDAQ:EYE) 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 6 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 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 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 5.1% during the first two months of the fourth 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 70 percent of these stocks already outperformed the market in Q4.
Disclosure: None. This article was originally published at Insider Monkey.
