Is West Corp (WSTC) Going to Burn These Hedge Funds?

Reputable billionaire investors such as Nelson Peltz and David Tepper generate exorbitant profits for their wealthy accredited investors (a minimum of $1 million in investable assets would be required to invest in a hedge fund and most successful hedge funds won’t accept your savings unless you commit at least $5 million) by pinpointing winning small-cap stocks. There is little or no publicly-available information at all on some of these small companies, which makes it hard for an individual investor to pin down a winner within the small-cap space. However, hedge funds and other big asset managers can do the due diligence and analysis for you instead, thanks to their highly-skilled research teams and vast resources to conduct an appropriate evaluation process. Looking for potential winners within the small-cap galaxy of stocks? We believe following the smart money is a good starting point.

Is West Corp (NASDAQ:WSTC) a buy here? The best stock pickers are turning bullish. The number of long hedge fund bets that are revealed through the 13F filings advanced by 2 in recent months. 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 Cyberark Software Ltd (NASDAQ:CYBR), Diebold Incorporated (NYSE:DBD), and Eagle Bancorp, Inc. (NASDAQ:EGBN) to gather more data points.

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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Hedge fund activity in West Corp (NASDAQ:WSTC)

At the end of the third quarter, a total of 15 of the hedge funds tracked by Insider Monkey held long positions in this stock, a 15% rise from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards WSTC over the last 5 quarters, which fell heavily heading into this year, but has rebounded over the past 2 quarters. With the smart money’s positions undergoing their usual ebb and flow, there exists a select group of notable hedge fund managers who were upping their holdings meaningfully (or already accumulated large positions).

When looking at the institutional investors followed by Insider Monkey, Citadel Investment Group, led by Ken Griffin, holds the most valuable position in West Corp (NASDAQ:WSTC). Citadel Investment Group has a $13.8 million position in the stock. Coming in second is Millennium Management, founded by Israel Englander, which holds an $8.8 million position. Other professional money managers that are bullish encompass John Overdeck and David Siegel’s Two Sigma Advisors, Roger Ibbotson’s Zebra Capital Management, and Jim Simons’ Renaissance Technologies. We should note that none of these hedge funds are 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.

Consequently, key money managers have been driving this bullishness. Hutchin Hill Capital, led by Neil Chriss, initiated the most valuable position in West Corp (NASDAQ:WSTC). Hutchin Hill Capital had $0.8 million invested in the company at the end of the quarter. Peter Algert and Kevin Coldiron’s Algert Coldiron Investors also made a $0.5 million investment in the stock during the quarter. The other funds with new positions in the stock are James Dondero’s Highland Capital Management and Joshua Packwood and Schuster Tanger’s Radix Partners.

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as West Corp (NASDAQ:WSTC) but similarly valued. These stocks are Cyberark Software Ltd (NASDAQ:CYBR), Diebold Incorporated (NYSE:DBD), Eagle Bancorp, Inc. (NASDAQ:EGBN), and Steelcase Inc. (NYSE:SCS). All of these stocks’ market caps are similar to WSTC’s market cap.

As you can see these stocks had an average of 18 hedge funds with bullish positions and the average amount invested in these stocks was $141 million. That figure was $42 million in WSTC’s case. Cyberark Software Ltd (NASDAQ:CYBR) is the most popular stock in this table. On the other hand Eagle Bancorp, Inc. (NASDAQ:EGBN) is the least popular one with only 16 bullish hedge fund positions. Compared to these stocks West Corp (NASDAQ:WSTC) is even less popular than EGBN. Considering that hedge funds aren’t fond of this stock in relation to other companies analyzed in this article, it may be a good idea to analyze it in detail and understand why the smart money isn’t behind this stock. This isn’t necessarily bad news. Although it is possible that hedge funds may think the stock is overpriced and view the stock as a short candidate, they may not be very familiar with the bullish thesis. In either case more research is warranted.

Disclosure: None