Before we spend countless hours researching a company, we like to analyze what insiders, hedge funds and billionaire investors think of the stock first. This is a necessary first step in our investment process because our research has shown that the elite investors' consensus returns have been exceptional. In the following paragraphs, we find out what the billionaire investors and hedge funds think of Western Alliance Bancorporation (NYSE:WAL).
Western Alliance Bancorporation (NYSE:WAL) was in 27 hedge funds' portfolios at the end of the first quarter of 2020. WAL investors should be aware of a decrease in hedge fund sentiment of late. There were 32 hedge funds in our database with WAL positions at the end of the previous quarter. Our calculations also showed that WAL 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.
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 was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 58 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.
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 stocks recommended/scorned by legendary Bill Miller. 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. With all of this in mind let's check out the new hedge fund action encompassing Western Alliance Bancorporation (NYSE:WAL).
What does smart money think about Western Alliance Bancorporation (NYSE:WAL)?
At Q1's end, a total of 27 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -16% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards WAL over the last 18 quarters. With hedgies' sentiment swirling, there exists an "upper tier" of noteworthy hedge fund managers who were adding to their stakes meaningfully (or already accumulated large positions).
More specifically, Citadel Investment Group was the largest shareholder of Western Alliance Bancorporation (NYSE:WAL), with a stake worth $34.2 million reported as of the end of September. Trailing Citadel Investment Group was Adage Capital Management, which amassed a stake valued at $18.2 million. AQR Capital Management, Arrowstreet Capital, and Gillson Capital 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 Elizabeth Park Capital Management allocated the biggest weight to Western Alliance Bancorporation (NYSE:WAL), around 2.7% of its 13F portfolio. Castine Capital Management is also relatively very bullish on the stock, designating 2.51 percent of its 13F equity portfolio to WAL.
Seeing as Western Alliance Bancorporation (NYSE:WAL) has witnessed bearish sentiment from the smart money, it's safe to say that there is a sect of fund managers who were dropping their full holdings by the end of the first quarter. Interestingly, Ravi Chopra's Azora Capital dumped the largest position of the 750 funds watched by Insider Monkey, valued at an estimated $15.3 million in stock. Usman Waheed's fund, Strycker View Capital, also said goodbye to its stock, about $14.9 million worth. These bearish behaviors are intriguing to say the least, as aggregate hedge fund interest fell by 5 funds by the end of the first quarter.
Let's now take a look at hedge fund activity in other stocks similar to Western Alliance Bancorporation (NYSE:WAL). These stocks are Darling Ingredients Inc. (NYSE:DAR), Glacier Bancorp, Inc. (NASDAQ:GBCI), ALLETE Inc (NYSE:ALE), and Flowserve Corporation (NYSE:FLS). All of these stocks' market caps are similar to WAL's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position DAR,25,255260,9 GBCI,12,36299,-1 ALE,18,147349,-7 FLS,29,181471,3 Average,21,155095,1 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 21 hedge funds with bullish positions and the average amount invested in these stocks was $155 million. That figure was $137 million in WAL's case. Flowserve Corporation (NYSE:FLS) is the most popular stock in this table. On the other hand Glacier Bancorp, Inc. (NASDAQ:GBCI) is the least popular one with only 12 bullish hedge fund positions. Western Alliance Bancorporation (NYSE:WAL) is not the most popular stock in this group but hedge fund interest is still above average. 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 but still beat the market by 13.2 percentage points. Hedge funds were also right about betting on WAL as the stock returned 25.7% in Q2 (through the end of May) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
Disclosure: None. This article was originally published at Insider Monkey.