Many prominent investors, including Warren Buffett, David Tepper and Stan Druckenmiller, have been cautious regarding the current bull market and missed out as the stock market reached another high in recent weeks. On the other hand, technology hedge funds weren’t timid and registered double digit market beating gains. Financials, energy and industrial stocks initially suffered the most but many of these stocks delivered strong returns since November and hedge funds actually increased their positions in these stocks. In this article we will find out how hedge fund sentiment towards West Fraser Timber Co. Ltd. (NYSE:WFG) changed recently.
Hedge fund interest in West Fraser Timber Co. Ltd. (NYSE:WFG) shares was flat at the end of last quarter. This is usually a negative indicator. Our calculations also showed that WFG isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings). 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 Fiverr International Ltd. (NYSE:FVRR), WEX Inc (NYSE:WEX), and Zions Bancorporation, National Association (NASDAQ:ZION) to gather more data points.
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 79 percentage points since March 2017 (see the details here). That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Blair Levinsky of Waratah Capital Advisors
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. We go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our homepage. Keeping this in mind let’s go over the key hedge fund action encompassing West Fraser Timber Co. Ltd. (NYSE:WFG).
Do Hedge Funds Think WFG Is A Good Stock To Buy Now?
At second quarter’s end, a total of 25 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 0% from the first quarter of 2020. The graph below displays the number of hedge funds with bullish position in WFG over the last 24 quarters. With hedge funds’ sentiment swirling, there exists a few notable hedge fund managers who were upping their stakes considerably (or already accumulated large positions).
The largest stake in West Fraser Timber Co. Ltd. (NYSE:WFG) was held by Arrowstreet Capital, which reported holding $142.9 million worth of stock at the end of June. It was followed by Impala Asset Management with a $123.6 million position. Other investors bullish on the company included Waratah Capital Advisors, Scopus Asset Management, and Renaissance Technologies. In terms of the portfolio weights assigned to each position Appian Way Asset Management allocated the biggest weight to West Fraser Timber Co. Ltd. (NYSE:WFG), around 9.38% of its 13F portfolio. Impala Asset Management is also relatively very bullish on the stock, setting aside 8.23 percent of its 13F equity portfolio to WFG.
Seeing as West Fraser Timber Co. Ltd. (NYSE:WFG) has witnessed declining sentiment from hedge fund managers, logic holds that there is a sect of money managers that elected to cut their positions entirely heading into Q3. At the top of the heap, Ken Heebner’s Capital Growth Management dumped the biggest investment of all the hedgies watched by Insider Monkey, totaling an estimated $5 million in stock. Ryan Tolkin (CIO)’s fund, Schonfeld Strategic Advisors, also sold off its stock, about $4.1 million worth. These transactions are important to note, as total hedge fund interest stayed the same (this is a bearish signal in our experience).
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as West Fraser Timber Co. Ltd. (NYSE:WFG) but similarly valued. These stocks are Fiverr International Ltd. (NYSE:FVRR), WEX Inc (NYSE:WEX), Zions Bancorporation, National Association (NASDAQ:ZION), Ralph Lauren Corporation (NYSE:RL), Capri Holdings Limited (NYSE:CPRI), Jabil Inc. (NYSE:JBL), and Ares Capital Corporation (NASDAQ:ARCC). This group of stocks’ market caps match WFG’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| FVRR | 30 | 465684 | 3 |
| WEX | 20 | 474265 | -6 |
| ZION | 24 | 153157 | 0 |
| RL | 32 | 690613 | -2 |
| CPRI | 44 | 891139 | -3 |
| JBL | 26 | 513612 | 2 |
| ARCC | 12 | 86611 | -3 |
| Average | 26.9 | 467869 | -1.3 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 26.9 hedge funds with bullish positions and the average amount invested in these stocks was $468 million. That figure was $591 million in WFG’s case. Capri Holdings Limited (NYSE:CPRI) is the most popular stock in this table. On the other hand Ares Capital Corporation (NASDAQ:ARCC) is the least popular one with only 12 bullish hedge fund positions. West Fraser Timber Co. Ltd. (NYSE:WFG) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for WFG is 55.3. 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. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 24% in 2021 through October 22nd and still beat the market by 1.6 percentage points. A small number of hedge funds were also right about betting on WFG as the stock returned 18.6% since the end of the second quarter (through 10/22) and outperformed the market by an even larger margin.
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Disclosure: None. This article was originally published at Insider Monkey.
