Hedge Fund Sentiment Is Stagnant On Westpac Banking Corporation (WBK)
Hedge Funds and other institutional investors have just completed filing their 13Fs with the Securities and Exchange Commission, revealing their equity portfolios as of the end of September. At Insider Monkey, we follow nearly 900 active hedge funds and notable investors and by analyzing their 13F filings, we can determine the stocks that they are collectively bullish on. One of their picks is Westpac Banking Corporation (NYSE:WBK), so let’s take a closer look at the sentiment that surrounds it in the current quarter.
Westpac Banking Corporation (NYSE:WBK) shares haven't seen a lot of action during the second quarter. Overall, hedge fund sentiment was unchanged. The stock was in 3 hedge funds' portfolios at the end of March. Our calculations also showed that WBK isn't among the 30 most popular stocks among hedge funds (click for Q1 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 Colgate-Palmolive Company (NYSE:CL), The Sherwin-Williams Company (NYSE:SHW), and The Southern Company (NYSE:SO) to gather more data points.
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey's monthly stock picks returned 206.8% since March 2017 and outperformed the S&P 500 ETFs by more than 115 percentage points (see the details here). That's why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
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At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, an activist hedge fund wants to buy this $28 biotech stock for $50. So, we recommended a long position to our monthly premium newsletter subscribers. We go through lists like the 10 best battery 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 we're going to review the key hedge fund action encompassing Westpac Banking Corporation (NYSE:WBK).
Do Hedge Funds Think WBK Is A Good Stock To Buy Now?
Heading into the second quarter of 2021, a total of 3 of the hedge funds tracked by Insider Monkey were long this stock, a change of 0% from the fourth quarter of 2020. On the other hand, there were a total of 9 hedge funds with a bullish position in WBK a year ago. With the smart money's positions undergoing their usual ebb and flow, there exists a select group of noteworthy hedge fund managers who were upping their holdings significantly (or already accumulated large positions).
According to Insider Monkey's hedge fund database, Renaissance Technologies, holds the most valuable position in Westpac Banking Corporation (NYSE:WBK). Renaissance Technologies has a $33.1 million position in the stock, comprising less than 0.1%% of its 13F portfolio. The second most bullish fund manager is Citadel Investment Group, led by Ken Griffin, holding a $1.6 million position; less than 0.1%% of its 13F portfolio is allocated to the company. In terms of the portfolio weights assigned to each position Qtron Investments allocated the biggest weight to Westpac Banking Corporation (NYSE:WBK), around 0.19% of its 13F portfolio. Renaissance Technologies is also relatively very bullish on the stock, setting aside 0.04 percent of its 13F equity portfolio to WBK.
We view hedge fund activity in the stock unfavorable, but in this case there was only a single hedge fund selling its entire position: Stevens Capital 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 only one of the 800+ hedge funds tracked by Insider Monkey identified as a viable investment and initiated a position in the stock (that fund was Qtron Investments).
Let's now review hedge fund activity in other stocks - not necessarily in the same industry as Westpac Banking Corporation (NYSE:WBK) but similarly valued. We will take a look at Colgate-Palmolive Company (NYSE:CL), The Sherwin-Williams Company (NYSE:SHW), The Southern Company (NYSE:SO), Snowflake Inc (NYSE:SNOW), HCA Healthcare Inc (NYSE:HCA), Equinor ASA (NYSE:EQNR), and VMware, Inc. (NYSE:VMW). This group of stocks' market valuations are similar to WBK's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position CL,48,2304590,2 SHW,51,2016614,2 SO,35,464056,3 SNOW,71,12965065,17 HCA,62,3245183,-11 EQNR,8,99733,-10 VMW,25,549319,-10 Average,42.9,3092080,-1 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 42.9 hedge funds with bullish positions and the average amount invested in these stocks was $3092 million. That figure was $35 million in WBK's case. Snowflake Inc (NYSE:SNOW) is the most popular stock in this table. On the other hand Equinor ASA (NYSE:EQNR) is the least popular one with only 8 bullish hedge fund positions. Compared to these stocks Westpac Banking Corporation (NYSE:WBK) is even less popular than EQNR. Our overall hedge fund sentiment score for WBK is 14. 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. Hedge funds clearly dropped the ball on WBK as the stock delivered strong returns, though hedge funds' consensus picks still generated respectable returns. 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 17.2% in 2021 through June 11th and still beat the market by 3.3 percentage points. A small number of hedge funds were also right about betting on WBK as the stock returned 13.1% since Q1 (through June 11th) and outperformed the market by an even larger margin.
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Disclosure: None. This article was originally published at Insider Monkey.
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