At the end of February we announced the arrival of the first US recession since 2009 and we predicted that the market will decline by at least 20% in (see why hell is coming). In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. In this article, we will take a closer look at hedge fund sentiment towards WSFS Financial Corporation (NASDAQ:WSFS) at the end of the first quarter and determine whether the smart money was really smart about this stock.
WSFS Financial Corporation (NASDAQ:WSFS) investors should be aware of a decrease in hedge fund interest recently. Our calculations also showed that WSFS isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks).
Video: Watch our video about the top 5 most popular hedge fund stocks.
According to most market participants, hedge funds are perceived as slow, old financial vehicles of yesteryear. While there are greater than 8000 funds trading today, Our experts hone in on the bigwigs of this group, approximately 850 funds. These investment experts manage most of the smart money’s total capital, and by keeping track of their highest performing picks, Insider Monkey has formulated a few investment strategies that have historically outrun the S&P 500 index. Insider Monkey’s flagship short hedge fund strategy outrun the S&P 500 short ETFs by around 20 percentage points a year since its inception in March 2017. Our portfolio of short stocks lost 36% since February 2017 (through May 18th) even though the market was up 30% during the same period. We just shared a list of 8 short targets in our latest quarterly update .
Richard S. Pzena of Pzena Investment Management
At Insider Monkey we scour multiple sources to uncover the next great investment idea. There is a lot of volatility in the markets and this presents amazing investment opportunities from time to time. For example, this trader claims to deliver juiced up returns with one trade a week, so we are checking out his highest conviction idea. A second trader claims to score lucrative profits by utilizing a “weekend trading strategy”, so we look into his strategy’s picks. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We recently recommended several stocks partly inspired by legendary Bill Miller’s investor letter. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 in February after realizing the coronavirus pandemic’s significance before most investors. Now let’s view the key hedge fund action encompassing WSFS Financial Corporation (NASDAQ:WSFS).
Hedge fund activity in WSFS Financial Corporation (NASDAQ:WSFS)
At Q1’s end, a total of 12 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -25% from the previous quarter. By comparison, 20 hedge funds held shares or bullish call options in WSFS a year ago. With hedge funds’ capital changing hands, there exists a select group of notable hedge fund managers who were boosting their stakes substantially (or already accumulated large positions).
Among these funds, Renaissance Technologies held the most valuable stake in WSFS Financial Corporation (NASDAQ:WSFS), which was worth $50.5 million at the end of the third quarter. On the second spot was Pzena Investment Management which amassed $19.8 million worth of shares. Royce & Associates, Millennium Management, and Stadium Capital Management were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Stadium Capital Management allocated the biggest weight to WSFS Financial Corporation (NASDAQ:WSFS), around 2.24% of its 13F portfolio. Swift Run Capital Management is also relatively very bullish on the stock, setting aside 2.16 percent of its 13F equity portfolio to WSFS.
Judging by the fact that WSFS Financial Corporation (NASDAQ:WSFS) has faced bearish sentiment from the entirety of the hedge funds we track, it’s safe to say that there was a specific group of hedge funds that decided to sell off their positions entirely by the end of the first quarter. Interestingly, Brandon Haley’s Holocene Advisors dumped the biggest position of the “upper crust” of funds monitored by Insider Monkey, comprising an estimated $1.1 million in stock. Donald Sussman’s fund, Paloma Partners, also sold off its stock, about $0.8 million worth. These bearish behaviors are interesting, as total hedge fund interest was cut by 4 funds by the end of the first quarter.
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as WSFS Financial Corporation (NASDAQ:WSFS) but similarly valued. We will take a look at OSI Systems, Inc. (NASDAQ:OSIS), Park National Corporation (NYSE:PRK), Rambus Inc. (NASDAQ:RMBS), and Karyopharm Therapeutics Inc (NASDAQ:KPTI). All of these stocks’ market caps resemble WSFS’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| OSIS | 15 | 12739 | -5 |
| PRK | 6 | 8226 | -4 |
| RMBS | 13 | 143097 | -6 |
| KPTI | 21 | 617463 | -3 |
| Average | 13.75 | 195381 | -4.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 13.75 hedge funds with bullish positions and the average amount invested in these stocks was $195 million. That figure was $99 million in WSFS’s case. Karyopharm Therapeutics Inc (NASDAQ:KPTI) is the most popular stock in this table. On the other hand Park National Corporation (NYSE:PRK) is the least popular one with only 6 bullish hedge fund positions. WSFS Financial Corporation (NASDAQ:WSFS) 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 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 12.3% in 2020 through June 30th and surpassed the market by 15.5 percentage points. Unfortunately WSFS wasn’t nearly as popular as these 10 stocks (hedge fund sentiment was quite bearish); WSFS investors were disappointed as the stock returned 15.7% during the second quarter and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.
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Disclosure: None. This article was originally published at Insider Monkey.
