Our extensive research has shown that imitating the smart money can generate significant returns for retail investors, which is why we track nearly 817 active prominent money managers and analyze their quarterly 13F filings. The stocks that are heavily bought by hedge funds historically outperformed the market, though there is no shortage of high profile failures like hedge funds’ 2018 losses in Facebook and Apple. Let’s take a closer look at what the funds we track think about Westpac Banking Corporation (NYSE:WBK) in this article.
Westpac Banking Corporation (NYSE:WBK) shares haven’t seen a lot of action during the second quarter. Overall, hedge fund sentiment was unchanged. The stock was in 4 hedge funds’ portfolios at the end of September. Our calculations also showed that WBK isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video for a quick look at the top 5 stocks). At the end of this article we will also compare WBK to other stocks including Relx PLC (NYSE:RELX), Analog Devices, Inc. (NASDAQ:ADI), and Lululemon Athletica inc. (NASDAQ:LULU) to get a better sense of its popularity.
Video: Watch our video about the top 5 most popular hedge fund stocks.
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s monthly stock picks returned 113% since March 2017 and outperformed the S&P 500 ETFs by more than 66 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
David Siegel of Two Sigma Advisors
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 10 most profitable companies in the world to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. With all of this in mind we’re going to go over the fresh hedge fund action regarding Westpac Banking Corporation (NYSE:WBK).
How are hedge funds trading Westpac Banking Corporation (NYSE:WBK)?
Heading into the fourth quarter of 2020, a total of 4 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 0% from the previous quarter. On the other hand, there were a total of 4 hedge funds with a bullish position in WBK a year ago. With hedge funds’ positions undergoing their usual ebb and flow, there exists a select group of notable hedge fund managers who were adding to their stakes considerably (or already accumulated large positions).
When looking at the institutional investors followed by Insider Monkey, Renaissance Technologies has the biggest position in Westpac Banking Corporation (NYSE:WBK), worth close to $24.3 million, comprising less than 0.1%% of its total 13F portfolio. Coming in second is Ken Griffin of Citadel Investment Group, with a $0.5 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Remaining hedge funds and institutional investors with similar optimism contain Israel Englander’s Millennium Management, John Overdeck and David Siegel’s Two Sigma Advisors and . In terms of the portfolio weights assigned to each position Renaissance Technologies allocated the biggest weight to Westpac Banking Corporation (NYSE:WBK), around 0.02% of its 13F portfolio. Two Sigma Advisors is also relatively very bullish on the stock, designating 0.0006 percent of its 13F equity portfolio to WBK.
We view hedge fund activity in the stock unfavorable, but in this case there was only a single hedge fund selling its entire position: ExodusPoint Capital. One hedge fund selling its entire position doesn’t always imply a bearish intent. Theoretically a hedge fund may decide to sell a promising position in order to invest the proceeds in a more promising idea. However, we don’t think this is the case in this case because only one of the 800+ hedge funds tracked by Insider Monkey identified as a viable investment and initiated a position in the stock (that fund was Millennium Management).
Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Westpac Banking Corporation (NYSE:WBK) but similarly valued. These stocks are Relx PLC (NYSE:RELX), Analog Devices, Inc. (NASDAQ:ADI), Lululemon Athletica inc. (NASDAQ:LULU), CNOOC Limited (NYSE:CEO), Koninklijke Philips NV (NYSE:PHG), Veeva Systems Inc (NYSE:VEEV), and General Motors Company (NYSE:GM). This group of stocks’ market values resemble WBK’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| RELX | 6 | 114897 | 0 |
| ADI | 52 | 3649787 | 3 |
| LULU | 50 | 1273396 | 11 |
| CEO | 14 | 176612 | 1 |
| PHG | 10 | 56033 | 4 |
| VEEV | 38 | 733670 | 3 |
| GM | 60 | 4789000 | -9 |
| Average | 32.9 | 1541914 | 1.9 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 32.9 hedge funds with bullish positions and the average amount invested in these stocks was $1542 million. That figure was $25 million in WBK’s case. General Motors Company (NYSE:GM) is the most popular stock in this table. On the other hand Relx PLC (NYSE:RELX) is the least popular one with only 6 bullish hedge fund positions. Compared to these stocks Westpac Banking Corporation (NYSE:WBK) is even less popular than RELX. Our overall hedge fund sentiment score for WBK is 17. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. Hedge funds clearly dropped the ball on WBK as the stock delivered strong returns, though hedge funds’ consensus picks still generated respectable returns. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 30.7% in 2020 through November 27th and still beat the market by 16.1 percentage points. A small number of hedge funds were also right about betting on WBK as the stock returned 27.6% since Q3 (through November 27th) and outperformed the market by an even larger margin.
Follow Westpac Banking Corp Ltd (NYSE:WBK)
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Disclosure: None. This article was originally published at Insider Monkey.
