The successful funds run by legendary investors such as Dan Loeb and David Tepper make hundreds of millions of dollars for themselves and their investors by spending enormous resources doing research on small cap stocks that big investment banks don’t follow. Because of their pay structures, they have strong incentive to do the research necessary to beat the market. That’s why we pay close attention to what they think in small cap stocks. In this article, we take a closer look at Waterstone Financial, Inc. (NASDAQ:WSBF) from the perspective of those successful funds.
Is Waterstone Financial, Inc. (NASDAQ:WSBF) a buy, sell, or hold? Prominent investors are indeed becoming more confident. The number of bullish hedge fund positions experienced an increase of 2 in recent months. There were 15 hedge funds in our database with WSBF holdings at the end of the third quarter. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Seres Therapeutics Inc (NASDAQ:MCRB), NN, Inc. (NASDAQ:NNBR), and First Financial Corp (NASDAQ:THFF) to gather more data points.
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At Insider Monkey, we’ve developed an investment strategy that has delivered market-beating returns over the past 12 months. Our strategy identifies the 100 best-performing funds of the previous quarter from among the collection of 700+ successful funds that we track in our database, which we accomplish using our returns methodology. We then study the portfolios of those 100 funds using the latest 13F data to uncover the 30 most popular mid-cap stocks (market caps of between $1 billion and $10 billion) among them to hold until the next filing period. This strategy delivered 18% gains over the past 12 months, more than doubling the 8% returns enjoyed by the S&P 500 ETFs.
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What does the smart money think about Waterstone Financial, Inc. (NASDAQ:WSBF)?
Heading into the fourth quarter of 2016, a total of 15 of the hedge funds tracked by Insider Monkey held long positions in this stock, a rise of 15% from one quarter earlier. On the other hand, there were a total of 10 hedge funds with a bullish position in WSBF at the beginning of this year. With hedgies’ sentiment swirling, there exists a select group of noteworthy hedge fund managers who were boosting their holdings meaningfully (or already accumulated large positions).
According to Insider Monkey’s hedge fund database, Renaissance Technologies, one of the biggest hedge funds in the world, holds the largest position in Waterstone Financial, Inc. (NASDAQ:WSBF). Renaissance Technologies has a $38.3 million position in the stock. The second largest stake is held by Michael Price’s MFP Investors holding a $20.2 million position; the fund has 2.7% of its 13F portfolio invested in the stock. Some other members of the smart money that hold long positions encompass Lawrence Seidman’s Seidman Investment Partnership, John D. Gillespie’s Prospector Partners and Israel Englander’s Millennium Management. We should note that MFP Investors is among our list of the 100 best performing hedge funds which is based on the performance of their 13F long positions in non-microcap stocks.
As aggregate interest increased, key hedge funds have jumped into Waterstone Financial, Inc. (NASDAQ:WSBF) headfirst. Peter Rathjens,Bruce Clarke and John Campbell of Arrowstreet Capital created the biggest position in Waterstone Financial, Inc. (NASDAQ:WSBF). Arrowstreet Capital had $0.3 million invested in the company at the end of the quarter. Glenn Russell Dubin’s Highbridge Capital Management also initiated a $0.2 million position during the quarter. The only other fund with a brand new WSBF position is Chao Ku’s Nine Chapters Capital Management.
Let’s also examine hedge fund activity in other stocks similar to Waterstone Financial, Inc. (NASDAQ:WSBF). These stocks are Seres Therapeutics Inc (NASDAQ:MCRB), NN, Inc. (NASDAQ:NNBR), First Financial Corp (NASDAQ:THFF), and Alpha and Omega Semiconductor Ltd (NASDAQ:AOSL). This group of stocks’ market caps are similar to WSBF’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| MCRB | 13 | 25183 | -4 |
| NNBR | 7 | 46591 | 1 |
| THFF | 5 | 7444 | 0 |
| AOSL | 15 | 50869 | 3 |
As you can see these stocks had an average of 10 hedge funds with bullish positions and the average amount invested in these stocks was $33 million. That figure was $85 million in WSBF’s case. Alpha and Omega Semiconductor Ltd (NASDAQ:AOSL) is the most popular stock in this table. On the other hand First Financial Corp (NASDAQ:THFF) is the least popular one with only 5 bullish hedge fund positions. Waterstone Financial, Inc. (NASDAQ:WSBF) 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. In this regard AOSL might be a better candidate to consider taking a long position in.
Disclosure: None
