Hedge funds are known to underperform the bull markets but that’s not because they are terrible at stock picking. Hedge funds underperform because their net exposure in only 40-70% and they charge exorbitant fees. No one knows what the future holds and how market participants will react to the bountiful news that floods in each day. However, hedge funds’ consensus picks on average deliver market beating returns. For example in the first 2.5 months of this year the Standard and Poor’s 500 Index returned approximately 13.1% (including dividend payments). Conversely, hedge funds’ top 15 large-cap stock picks generated a return of 19.7% during the same 2.5-month period, with 93% of these stock picks outperforming the broader market benchmark. Interestingly, an average long/short hedge fund returned only 5% due to the hedges they implemented and the large fees they charged. If you pay attention to the actual hedge fund returns (5%) versus the returns of their long stock picks, you might believe that it is a waste of time to analyze hedge funds’ purchases. We know better. That’s why we scrutinize hedge fund sentiment before we invest in a stock like Hancock Whitney Corporation (NASDAQ:HWC).
Hancock Whitney Corporation (NASDAQ:HWC) investors should be aware of a decrease in enthusiasm from smart money of late. HWC was in 15 hedge funds’ portfolios at the end of December. There were 24 hedge funds in our database with HWC positions at the end of the previous quarter. Our calculations also showed that HWC isn’t among the 30 most popular stocks among hedge funds.
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 market by 32 percentage points since May 2014 through March 12, 2019 (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 27.5% through March 12, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Let’s review the new hedge fund action encompassing Hancock Whitney Corporation (NASDAQ:HWC).
How have hedgies been trading Hancock Whitney Corporation (NASDAQ:HWC)?
At Q4’s end, a total of 15 of the hedge funds tracked by Insider Monkey were long this stock, a change of -38% from the second quarter of 2018. Below, you can check out the change in hedge fund sentiment towards HWC over the last 14 quarters. With the smart money’s sentiment swirling, there exists an “upper tier” of key hedge fund managers who were boosting their holdings substantially (or already accumulated large positions).
The largest stake in Hancock Whitney Corporation (NASDAQ:HWC) was held by Basswood Capital, which reported holding $20.7 million worth of stock at the end of September. It was followed by Renaissance Technologies with a $16.4 million position. Other investors bullish on the company included D E Shaw, Millennium Management, and Forest Hill Capital.
Due to the fact that Hancock Whitney Corporation (NASDAQ:HWC) has faced declining sentiment from the entirety of the hedge funds we track, we can see that there exists a select few funds that elected to cut their positions entirely heading into Q3. It’s worth mentioning that Ravi Chopra’s Azora Capital dumped the largest stake of the 700 funds watched by Insider Monkey, totaling about $15.1 million in stock, and George Soros’s Soros Fund Management was right behind this move, as the fund dropped about $4.8 million worth. These moves are important to note, as aggregate hedge fund interest was cut by 9 funds heading into Q3.
Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Hancock Whitney Corporation (NASDAQ:HWC) but similarly valued. These stocks are LHC Group, Inc. (NASDAQ:LHCG), Valley National Bancorp (NASDAQ:VLY), Qualys Inc (NASDAQ:QLYS), and Sabra Health Care REIT Inc (NASDAQ:SBRA). This group of stocks’ market values match HWC’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| LHCG | 27 | 111944 | 2 |
| VLY | 8 | 14064 | 0 |
| QLYS | 17 | 180037 | -1 |
| SBRA | 15 | 82224 | 6 |
| Average | 16.75 | 97067 | 1.75 |
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 $97 million. That figure was $112 million in HWC’s case. LHC Group, Inc. (NASDAQ:LHCG) is the most popular stock in this table. On the other hand Valley National Bancorp (NYSE:VLY) is the least popular one with only 8 bullish hedge fund positions. Hancock Whitney Corporation (NASDAQ:HWC) is not the least popular stock in this group but hedge fund interest is still below average. Our calculations showed that top 15 most popular stocks) among hedge funds returned 24.2% through April 22nd and outperformed the S&P 500 ETF (SPY) by more than 7 percentage points. A small number of hedge funds were also right about betting on HWC, though not to the same extent, as the stock returned 21.1% and outperformed the market as well.
Disclosure: None. This article was originally published at Insider Monkey.
