How do we determine whether Washington Federal Inc. (NASDAQ:WAFD) makes for a good investment at the moment? We analyze the sentiment of a select group of the very best investors in the world, who spend immense amounts of time and resources studying companies. They may not always be right (no one is), but data shows that their consensus long positions have historically outperformed the market when we adjust for known risk factors.
Is Washington Federal Inc. (NASDAQ:WAFD) worth your attention right now? Money managers are in a bearish mood. The number of bullish hedge fund bets went down by 1 lately. Our calculations also showed that WAFD isn’t among the 30 most popular stocks among hedge funds.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? 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 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 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. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in our short portfolio.
We’re going to analyze the recent hedge fund action encompassing Washington Federal Inc. (NASDAQ:WAFD).
What does the smart money think about Washington Federal Inc. (NASDAQ:WAFD)?
Heading into the first quarter of 2019, a total of 12 of the hedge funds tracked by Insider Monkey were long this stock, a change of -8% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards WAFD over the last 14 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.
Among these funds, Renaissance Technologies held the most valuable stake in Washington Federal Inc. (NASDAQ:WAFD), which was worth $20.9 million at the end of the third quarter. On the second spot was Balyasny Asset Management which amassed $18.1 million worth of shares. Moreover, Arrowstreet Capital, Millennium Management, and GLG Partners were also bullish on Washington Federal Inc. (NASDAQ:WAFD), allocating a large percentage of their portfolios to this stock.
Because Washington Federal Inc. (NASDAQ:WAFD) has witnessed falling interest from the aggregate hedge fund industry, logic holds that there lies a certain “tier” of funds who were dropping their entire stakes heading into Q3. At the top of the heap, Ken Griffin’s Citadel Investment Group dropped the biggest stake of the 700 funds followed by Insider Monkey, worth about $4.5 million in stock. Matthew Tewksbury’s fund, Stevens Capital Management, also dumped its stock, about $0.4 million worth. These transactions are intriguing to say the least, as aggregate hedge fund interest fell by 1 funds heading into Q3.
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Washington Federal Inc. (NASDAQ:WAFD) but similarly valued. We will take a look at Eventbrite, Inc. (NYSE:EB), Beacon Roofing Supply, Inc. (NASDAQ:BECN), ProAssurance Corporation (NYSE:PRA), and National Vision Holdings, Inc. (NASDAQ:EYE). All of these stocks’ market caps are closest to WAFD’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| EB | 8 | 415314 | -12 |
| BECN | 21 | 356118 | 0 |
| PRA | 13 | 172578 | 0 |
| EYE | 15 | 340539 | -2 |
| Average | 14.25 | 321137 | -3.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 14.25 hedge funds with bullish positions and the average amount invested in these stocks was $321 million. That figure was $77 million in WAFD’s case. Beacon Roofing Supply, Inc. (NASDAQ:BECN) is the most popular stock in this table. On the other hand Eventbrite, Inc. (NYSE:EB) is the least popular one with only 8 bullish hedge fund positions. Washington Federal Inc. (NASDAQ:WAFD) 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 WAFD, though not to the same extent, as the stock returned 22.4% and outperformed the market as well.
Disclosure: None. This article was originally published at Insider Monkey.
