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The 800+ hedge funds and famous money managers tracked by Insider Monkey have already compiled and submitted their 13F filings for the third quarter, which unveil their equity positions as of September 30. We went through these filings, fixed typos and other more significant errors and identified the changes in hedge fund portfolios. Our extensive review of these public filings is finally over, so this article is set to reveal the smart money sentiment towards East West Bancorp, Inc. (NASDAQ:EWBC).
Is EWBC a good stock to buy now? Hedge funds were in a pessimistic mood. The number of long hedge fund positions went down by 3 lately. East West Bancorp, Inc. (NASDAQ:EWBC) was in 20 hedge funds' portfolios at the end of September. The all time high for this statistic is 30. Our calculations also showed that EWBC isn't among the 30 most popular stocks among hedge funds (click for Q3 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.
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 S&P 500 ETFs by 66 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 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.
Donald Sussman of Paloma Partners
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 15 best blue chip stocks to pick the best large-cap stocks to buy. 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 website. With all of this in mind we're going to go over the latest hedge fund action regarding East West Bancorp, Inc. (NASDAQ:EWBC).
Do Hedge Funds Think EWBC Is A Good Stock To Buy Now?
Heading into the fourth quarter of 2020, a total of 20 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -13% from one quarter earlier. On the other hand, there were a total of 30 hedge funds with a bullish position in EWBC a year ago. With the smart money's capital changing hands, there exists a select group of notable hedge fund managers who were adding to their stakes meaningfully (or already accumulated large positions).
Among these funds, Adage Capital Management held the most valuable stake in East West Bancorp, Inc. (NASDAQ:EWBC), which was worth $68.2 million at the end of the third quarter. On the second spot was Fisher Asset Management which amassed $43.5 million worth of shares. Two Sigma Advisors, AQR Capital Management, and Interval Partners 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 Interval Partners allocated the biggest weight to East West Bancorp, Inc. (NASDAQ:EWBC), around 0.52% of its 13F portfolio. Basswood Capital is also relatively very bullish on the stock, earmarking 0.46 percent of its 13F equity portfolio to EWBC.
Judging by the fact that East West Bancorp, Inc. (NASDAQ:EWBC) has experienced a decline in interest from the entirety of the hedge funds we track, logic holds that there was a specific group of hedge funds who sold off their entire stakes by the end of the third quarter. Intriguingly, Donald Sussman's Paloma Partners dumped the largest stake of the "upper crust" of funds tracked by Insider Monkey, worth about $1.7 million in stock, and Paul Tudor Jones's Tudor Investment Corp was right behind this move, as the fund dropped about $0.6 million worth. These bearish behaviors are intriguing to say the least, as aggregate hedge fund interest dropped by 3 funds by the end of the third quarter.
Let's go over hedge fund activity in other stocks - not necessarily in the same industry as East West Bancorp, Inc. (NASDAQ:EWBC) but similarly valued. We will take a look at BRP Inc. (NASDAQ:DOOO), AutoNation, Inc. (NYSE:AN), Tempur Sealy International Inc. (NYSE:TPX), Performance Food Group Company (NYSE:PFGC), BridgeBio Pharma, Inc. (NASDAQ:BBIO), Zai Lab Limited (NASDAQ:ZLAB), and Science Applications International Corp (NYSE:SAIC). This group of stocks' market values are closest to EWBC's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position DOOO,12,119883,-2 AN,33,414421,4 TPX,46,1130388,0 PFGC,29,276923,9 BBIO,13,1527978,-1 ZLAB,28,356502,1 SAIC,21,223187,-14 Average,26,578469,-0.4 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 26 hedge funds with bullish positions and the average amount invested in these stocks was $578 million. That figure was $196 million in EWBC's case. Tempur Sealy International Inc. (NYSE:TPX) is the most popular stock in this table. On the other hand BRP Inc. (NASDAQ:DOOO) is the least popular one with only 12 bullish hedge fund positions. East West Bancorp, Inc. (NASDAQ:EWBC) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for EWBC is 33.8. 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 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 30.7% in 2020 through December 14th and still beat the market by 15.8 percentage points. A small number of hedge funds were also right about betting on EWBC as the stock returned 49.7% since the end of the third quarter (through 12/14) and outperformed the market by an even larger margin.
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Disclosure: None. This article was originally published at Insider Monkey.