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 (Recession is Imminent: We Need A Travel Ban NOW). 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 Bankwell Financial Group, Inc. (NASDAQ:BWFG).
Bankwell Financial Group, Inc. (NASDAQ:BWFG) was in 4 hedge funds' portfolios at the end of March. BWFG shareholders have witnessed a decrease in enthusiasm from smart money in recent months. There were 5 hedge funds in our database with BWFG positions at the end of the previous quarter. Our calculations also showed that BWFG 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.
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 51 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 36% through May 18th. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
[caption id="attachment_27209" align="aligncenter" width="396"] Jim Simons Founder of Renaissance Technologies[/caption]
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, 2020's unprecedented market conditions provide us with the highest number of trading opportunities in a decade. So we are checking out trades like this one. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. 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 the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind we're going to review the new hedge fund action regarding Bankwell Financial Group, Inc. (NASDAQ:BWFG).
How are hedge funds trading Bankwell Financial Group, Inc. (NASDAQ:BWFG)?
At the end of the first quarter, a total of 4 of the hedge funds tracked by Insider Monkey were long this stock, a change of -20% from one quarter earlier. On the other hand, there were a total of 5 hedge funds with a bullish position in BWFG a year ago. With hedge funds' capital changing hands, there exists an "upper tier" of noteworthy hedge fund managers who were upping their holdings meaningfully (or already accumulated large positions).
When looking at the institutional investors followed by Insider Monkey, Seidman Investment Partnership, managed by Lawrence Seidman, holds the most valuable position in Bankwell Financial Group, Inc. (NASDAQ:BWFG). Seidman Investment Partnership has a $10.7 million position in the stock, comprising 13.2% of its 13F portfolio. Sitting at the No. 2 spot is Renaissance Technologies, holding a $3.2 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Remaining members of the smart money that are bullish comprise Fred Cummings's Elizabeth Park Capital Management, John Zaro's Bourgeon Capital and . In terms of the portfolio weights assigned to each position Seidman Investment Partnership allocated the biggest weight to Bankwell Financial Group, Inc. (NASDAQ:BWFG), around 13.16% of its 13F portfolio. Elizabeth Park Capital Management is also relatively very bullish on the stock, designating 1.23 percent of its 13F equity portfolio to BWFG.
We view hedge fund activity in the stock unfavorable, but in this case there was only a single hedge fund selling its entire position: Endicott Management. 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 none of the 750+ hedge funds tracked by Insider Monkey identified BWFG as a viable investment and initiated a position in the stock.
Let's check out hedge fund activity in other stocks - not necessarily in the same industry as Bankwell Financial Group, Inc. (NASDAQ:BWFG) but similarly valued. These stocks are Aytu BioScience, Inc. (NASDAQ:AYTU), DHI Group Inc. (NYSE:DHX), Marrone Bio Innovations Inc (NASDAQ:MBII), and Vericity, Inc. (NASDAQ:VERY). This group of stocks' market caps are closest to BWFG's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position AYTU,5,827,4 DHX,15,30451,-1 MBII,3,10002,1 VERY,1,688,0 Average,6,10492,1 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 6 hedge funds with bullish positions and the average amount invested in these stocks was $10 million. That figure was $16 million in BWFG's case. DHI Group Inc. (NYSE:DHX) is the most popular stock in this table. On the other hand Vericity, Inc. (NASDAQ:VERY) is the least popular one with only 1 bullish hedge fund positions. Bankwell Financial Group, Inc. (NASDAQ:BWFG) 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 8.3% in 2020 through the end of May and surpassed the market by 13.2 percentage points. Unfortunately BWFG wasn't nearly as popular as these 10 stocks (hedge fund sentiment was quite bearish); BWFG investors were disappointed as the stock returned -3.1% 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.
Disclosure: None. This article was originally published at Insider Monkey.