We are still in an overall bull market and many stocks that smart money investors were piling into surged through the end of November. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained 54% and 51% respectively. Hedge funds' top 3 stock picks returned 41.7% this year and beat the S&P 500 ETFs by 14 percentage points. Investing in index funds guarantees you average returns, not superior returns. We are looking to generate superior returns for our readers. That's why we believe it isn't a waste of time to check out hedge fund sentiment before you invest in a stock like Washington Trust Bancorp (NASDAQ:WASH).
Washington Trust Bancorp (NASDAQ:WASH) has experienced an increase in enthusiasm from smart money lately. Our calculations also showed that WASH isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings). Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Hedge funds' reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn't keep up with the unhedged returns of the market indices. Our research has shown that hedge funds' small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the Russell 2000 ETFs by 40 percentage points since May 2014 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.
[caption id="attachment_26073" align="alignnone" width="600"] Jim Simons of Renaissance Technologies[/caption]
We leave no stone unturned when looking for the next great investment idea. For example Discover is offering this insane cashback card, so we look into shorting the stock. One of the most bullish analysts in America just put his money where his mouth is. He says, “I’m investing more today than I did back in early 2009.” So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We even check out this option genius’ weekly trade ideas. This December we recommended Adams Energy based on an under-the-radar fund manager’s investor letter and the stock gained 20 percent. Now, we're going to view the new hedge fund action regarding Washington Trust Bancorp (NASDAQ:WASH).
How are hedge funds trading Washington Trust Bancorp (NASDAQ:WASH)?
At the end of the third quarter, a total of 8 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 14% from the previous quarter. By comparison, 8 hedge funds held shares or bullish call options in WASH a year ago. So, let's review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Renaissance Technologies was the largest shareholder of Washington Trust Bancorp (NASDAQ:WASH), with a stake worth $24.5 million reported as of the end of September. Trailing Renaissance Technologies was Millennium Management, which amassed a stake valued at $2.5 million. Winton Capital Management, Driehaus Capital, and Two Sigma Advisors 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 Renaissance Technologies allocated the biggest weight to Washington Trust Bancorp (NASDAQ:WASH), around 0.02% of its 13F portfolio. Driehaus Capital is also relatively very bullish on the stock, setting aside 0.02 percent of its 13F equity portfolio to WASH.
With a general bullishness amongst the heavyweights, some big names have jumped into Washington Trust Bancorp (NASDAQ:WASH) headfirst. Winton Capital Management, managed by David Harding, created the most valuable position in Washington Trust Bancorp (NASDAQ:WASH). Winton Capital Management had $1.1 million invested in the company at the end of the quarter. Ken Griffin's Citadel Investment Group also initiated a $0.3 million position during the quarter. The only other fund with a brand new WASH position is Paul Marshall and Ian Wace's Marshall Wace.
Let's now take a look at hedge fund activity in other stocks - not necessarily in the same industry as Washington Trust Bancorp (NASDAQ:WASH) but similarly valued. We will take a look at FARO Technologies, Inc. (NASDAQ:FARO), HealthStream, Inc. (NASDAQ:HSTM), Odonate Therapeutics, Inc. (NASDAQ:ODT), and Triumph Bancorp Inc (NASDAQ:TBK). All of these stocks' market caps resemble WASH's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position FARO,8,47745,1 HSTM,11,41631,-2 ODT,14,447024,1 TBK,6,29347,-1 Average,9.75,141437,-0.25 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 9.75 hedge funds with bullish positions and the average amount invested in these stocks was $141 million. That figure was $30 million in WASH's case. Odonate Therapeutics, Inc. (NASDAQ:ODT) is the most popular stock in this table. On the other hand Triumph Bancorp Inc (NASDAQ:TBK) is the least popular one with only 6 bullish hedge fund positions. Washington Trust Bancorp (NASDAQ:WASH) is not the least popular stock in this group but hedge fund interest is still below average. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. A small number of hedge funds were also right about betting on WASH, though not to the same extent, as the stock returned 8% during the first two months of the fourth quarter and outperformed the market.
Disclosure: None. This article was originally published at Insider Monkey.