As we already know from media reports and hedge fund investor letters, hedge funds delivered their best returns in a decade. Most investors who decided to stick with hedge funds after a rough 2018 recouped their losses by the end of the third quarter. We get to see hedge funds' thoughts towards the market and individual stocks by aggregating their quarterly portfolio movements and reading their investor letters. In this article, we will particularly take a look at what hedge funds think about First Western Financial, Inc. (NASDAQ:MYFW).
First Western Financial, Inc. (NASDAQ:MYFW) shares haven't seen a lot of action during the third quarter. Overall, hedge fund sentiment was unchanged. The stock was in 3 hedge funds' portfolios at the end of the third quarter of 2019. 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 AVEO Pharmaceuticals, Inc. (NASDAQ:AVEO), Stewardship Financial Corp (NASDAQ:SSFN), and LSI Industries, Inc. (NASDAQ:LYTS) to gather more data points. Our calculations also showed that MYFW 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' large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were 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'll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 27.8% through November 21, 2019. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
[caption id="attachment_27676" align="alignnone" width="355"] Israel Englander of Millennium Management[/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 as a one-way bet based on an under-the-radar fund manager's investor letter and the stock already gained 20 percent. Now we're going to analyze the recent hedge fund action surrounding First Western Financial, Inc. (NASDAQ:MYFW).
What have hedge funds been doing with First Western Financial, Inc. (NASDAQ:MYFW)?
At the end of the third quarter, a total of 3 of the hedge funds tracked by Insider Monkey were long this stock, a change of 0% from the previous quarter. The graph below displays the number of hedge funds with bullish position in MYFW over the last 17 quarters. With hedge funds' positions undergoing their usual ebb and flow, there exists a select group of noteworthy hedge fund managers who were adding to their holdings substantially (or already accumulated large positions).
The largest stake in First Western Financial, Inc. (NASDAQ:MYFW) was held by Elizabeth Park Capital Management, which reported holding $8 million worth of stock at the end of September. It was followed by Mendon Capital Advisors with a $0.6 million position. The only other hedge fund that is bullish on the company was Millennium Management.
Earlier we told you that the aggregate hedge fund interest in the stock was unchanged and we view this as a negative development. Even though there weren't any hedge funds dumping their holdings during the third quarter, there weren't any hedge funds initiating brand new positions. This indicates that hedge funds, at the very best, perceive this stock as dead money and they haven't identified any viable catalysts that can attract investor attention.
Let's check out hedge fund activity in other stocks similar to First Western Financial, Inc. (NASDAQ:MYFW). These stocks are AVEO Pharmaceuticals, Inc. (NASDAQ:AVEO), Stewardship Financial Corp (NASDAQ:SSFN), LSI Industries, Inc. (NASDAQ:LYTS), and AgroFresh Solutions Inc (NASDAQ:AGFS). This group of stocks' market values match MYFW's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position AVEO,5,2750,-2 SSFN,7,13701,2 LYTS,9,18319,0 AGFS,8,2189,2 Average,7.25,9240,0.5 [/table]
View the table here if you experience formatting issues.
As you can see these stocks had an average of 7.25 hedge funds with bullish positions and the average amount invested in these stocks was $9 million. That figure was $9 million in MYFW's case. LSI Industries, Inc. (NASDAQ:LYTS) is the most popular stock in this table. On the other hand AVEO Pharmaceuticals, Inc. (NASDAQ:AVEO) is the least popular one with only 5 bullish hedge fund positions. Compared to these stocks First Western Financial, Inc. (NASDAQ:MYFW) is even less popular than AVEO. Hedge funds dodged a bullet by taking a bearish stance towards MYFW. Our calculations showed that the top 20 most popular hedge fund stocks returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately, MYFW wasn't nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); MYFW investors were disappointed as the stock returned 0% during the fourth quarter (through the end of November) 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 70 percent of these stocks already outperformed the market so far in Q4.
Disclosure: None. This article was originally published at Insider Monkey.