The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We have processed the filings of the more than 700 world-class investment firms that we track and now have access to the collective wisdom contained in these filings, which are based on their December 31 holdings, data that is available nowhere else. Should you consider West Pharmaceutical Services Inc. (NYSE:WST) for your portfolio? We’ll look to this invaluable collective wisdom for the answer.
West Pharmaceutical Services Inc. (NYSE:WST) was in 20 hedge funds’ portfolios at the end of December. WST has experienced an increase in support from the world’s most elite money managers lately. There were 17 hedge funds in our database with WST positions at the end of the previous quarter. Our calculations also showed that WST 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.
Let’s take a look at the latest hedge fund action encompassing West Pharmaceutical Services Inc. (NYSE:WST).
What have hedge funds been doing with West Pharmaceutical Services Inc. (NYSE:WST)?
At Q4’s end, a total of 20 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 18% from the previous quarter. The graph below displays the number of hedge funds with bullish position in WST 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.
The largest stake in West Pharmaceutical Services Inc. (NYSE:WST) was held by Fisher Asset Management, which reported holding $90.7 million worth of stock at the end of September. It was followed by Intermede Investment Partners with a $26.1 million position. Other investors bullish on the company included Rock Springs Capital Management, Millennium Management, and Renaissance Technologies.
As one would reasonably expect, key hedge funds have jumped into West Pharmaceutical Services Inc. (NYSE:WST) headfirst. Balyasny Asset Management, managed by Dmitry Balyasny, established the largest position in West Pharmaceutical Services Inc. (NYSE:WST). Balyasny Asset Management had $0.8 million invested in the company at the end of the quarter. Minhua Zhang’s Weld Capital Management also initiated a $0.4 million position during the quarter. The following funds were also among the new WST investors: Matthew Hulsizer’s PEAK6 Capital Management, Hoon Kim’s Quantinno Capital, and Gavin Saitowitz and Cisco J. del Valle’s Springbok Capital.
Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as West Pharmaceutical Services Inc. (NYSE:WST) but similarly valued. We will take a look at A. O. Smith Corporation (NYSE:AOS), Molina Healthcare, Inc. (NYSE:MOH), Under Armour Inc (NYSE:UA), and Israel Chemicals Ltd. (NYSE:ICL). This group of stocks’ market values match WST’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| AOS | 29 | 503949 | -4 |
| MOH | 27 | 1113378 | -3 |
| UA | 27 | 607105 | -1 |
| ICL | 5 | 53471 | -3 |
| Average | 22 | 569476 | -2.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 22 hedge funds with bullish positions and the average amount invested in these stocks was $569 million. That figure was $203 million in WST’s case. A. O. Smith Corporation (NYSE:AOS) is the most popular stock in this table. On the other hand Israel Chemicals Ltd. (NYSE:ICL) is the least popular one with only 5 bullish hedge fund positions. West Pharmaceutical Services Inc. (NYSE:WST) 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 15 most popular stocks among hedge funds returned 21.3% through April 8th and outperformed the S&P 500 ETF (SPY) by more than 5 percentage points. Unfortunately WST wasn’t in this group. Hedge funds that bet on WST were disappointed as the stock returned 15.6% and underperformed the market. If you are interested in investing in large cap stocks, you should check out the top 15 hedge fund stocks as 12 of these outperformed the market.
Disclosure: None. This article was originally published at Insider Monkey.
