We hate to say this but, we told you so. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW and predicted a US recession when the S&P 500 Index was trading at the 3150 level. We also told you to short the market and buy long-term Treasury bonds. Our article also called for a total international travel ban. While we were warning you, President Trump minimized the threat and failed to act promptly. As a result of his inaction, we will now experience a deeper recession (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. A whopping number of 13F filings filed with U.S. Securities and Exchange Commission has been processed by Insider Monkey so that individual investors can look at the overall hedge fund sentiment towards the stocks included in their watchlists. These freshly-submitted public filings disclose money managers’ equity positions as of the end of the three-month period that ended December 31, so let’s proceed with the discussion of the hedge fund sentiment on Great Western Bancorp Inc (NYSE:GWB).
Is Great Western Bancorp Inc (NYSE:GWB) a buy, sell, or hold? The smart money is in a bullish mood. The number of bullish hedge fund bets advanced by 6 recently. Our calculations also showed that GWB isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of this article for Q3 rankings).
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by more than 41 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 35.3% through March 3rd. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Cliff Asness of AQR Capital Management
We leave no stone unturned when looking for the next great investment idea. For example, we believe electric vehicles and energy storage are set to become giant markets, and we want to take advantage of the declining lithium prices amid the COVID-19 pandemic. So we are checking out investment opportunities like this one. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind we’re going to take a look at the key hedge fund action regarding Great Western Bancorp Inc (NYSE:GWB).
What does smart money think about Great Western Bancorp Inc (NYSE:GWB)?
At the end of the fourth quarter, a total of 17 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 55% from the previous quarter. The graph below displays the number of hedge funds with bullish position in GWB over the last 18 quarters. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Great Western Bancorp Inc (NYSE:GWB) was held by Arrowstreet Capital, which reported holding $13 million worth of stock at the end of September. It was followed by Renaissance Technologies with a $12.6 million position. Other investors bullish on the company included AQR Capital Management, Millennium Management, and D E Shaw. In terms of the portfolio weights assigned to each position AlphaCrest Capital Management allocated the biggest weight to Great Western Bancorp Inc (NYSE:GWB), around 0.05% of its 13F portfolio. Arrowstreet Capital is also relatively very bullish on the stock, earmarking 0.03 percent of its 13F equity portfolio to GWB.
As aggregate interest increased, some big names have jumped into Great Western Bancorp Inc (NYSE:GWB) headfirst. Winton Capital Management, managed by David Harding, assembled the most valuable position in Great Western Bancorp Inc (NYSE:GWB). Winton Capital Management had $1 million invested in the company at the end of the quarter. Donald Sussman’s Paloma Partners also initiated a $1 million position during the quarter. The following funds were also among the new GWB investors: Mika Toikka’s AlphaCrest Capital Management, Benjamin A. Smith’s Laurion Capital Management, and Paul Tudor Jones’s Tudor Investment Corp.
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Great Western Bancorp Inc (NYSE:GWB) but similarly valued. We will take a look at Workiva Inc (NYSE:WK), Federal Signal Corporation (NYSE:FSS), Covanta Holding Corporation (NYSE:CVA), and Xencor Inc (NASDAQ:XNCR). This group of stocks’ market valuations resemble GWB’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| WK | 17 | 135876 | -5 |
| FSS | 18 | 90579 | -2 |
| CVA | 19 | 105799 | 5 |
| XNCR | 16 | 107347 | 2 |
| Average | 17.5 | 109900 | 0 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 17.5 hedge funds with bullish positions and the average amount invested in these stocks was $110 million. That figure was $48 million in GWB’s case. Covanta Holding Corporation (NYSE:CVA) is the most popular stock in this table. On the other hand Xencor Inc (NASDAQ:XNCR) is the least popular one with only 16 bullish hedge fund positions. Great Western Bancorp Inc (NYSE:GWB) 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 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks lost 13.0% in 2020 through April 6th but beat the market by 4.2 percentage points. Unfortunately GWB wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); GWB investors were disappointed as the stock returned -46.9% during the same time period and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.
