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Last year's fourth quarter was a rough one for investors and many hedge funds, which were naturally unable to overcome the big dip in the broad market, as the S&P 500 fell by about 4.8% during 2018 and average hedge fund losing about 1%. The Russell 2000, composed of smaller companies, performed even worse, trailing the S&P by more than 6 percentage points, as investors fled less-known quantities for safe havens. Luckily hedge funds were shifting their holdings into large-cap stocks. The 20 most popular hedge fund stocks actually generated an average return of 37.4% in 2019 (through the end of November) and outperformed the S&P 500 ETF by 9.9 percentage points. We are done processing the latest 13F filings and in this article we will study how hedge fund sentiment towards Washington Federal Inc. (NASDAQ:WAFD) changed during the first quarter.
Is Washington Federal Inc. (NASDAQ:WAFD) a first-rate stock to buy now? The smart money is taking a bullish view. The number of long hedge fund positions increased by 5 lately. Our calculations also showed that WAFD isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings). WAFD was in 14 hedge funds' portfolios at the end of September. There were 9 hedge funds in our database with WAFD holdings at the end of the previous quarter.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
At the moment there are several signals market participants use to appraise publicly traded companies. A duo of the best signals are hedge fund and insider trading indicators. Our experts have shown that, historically, those who follow the best picks of the top hedge fund managers can outpace the S&P 500 by a very impressive amount (see the details here).
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Noam Gottesman of GLG Partners[/caption]
We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world's largest cannabis market, so we check out this European marijuana stock pitch. 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 also rely on the best performing hedge funds' buy/sell signals. Let's review the fresh hedge fund action encompassing Washington Federal Inc. (NASDAQ:WAFD).
What does smart money think about Washington Federal Inc. (NASDAQ:WAFD)?
At Q3's end, a total of 14 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 56% from one quarter earlier. On the other hand, there were a total of 13 hedge funds with a bullish position in WAFD 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.
The largest stake in Washington Federal Inc. (NASDAQ:WAFD) was held by Arrowstreet Capital, which reported holding $33.6 million worth of stock at the end of September. It was followed by Renaissance Technologies with a $14.4 million position. Other investors bullish on the company included Citadel Investment Group, GLG Partners, and D E Shaw. In terms of the portfolio weights assigned to each position Arrowstreet Capital allocated the biggest weight to Washington Federal Inc. (NASDAQ:WAFD), around 0.08% of its 13F portfolio. Paloma Partners is also relatively very bullish on the stock, earmarking 0.02 percent of its 13F equity portfolio to WAFD.
With a general bullishness amongst the heavyweights, key money managers have jumped into Washington Federal Inc. (NASDAQ:WAFD) headfirst. PEAK6 Capital Management, managed by Matthew Hulsizer, established the most outsized call position in Washington Federal Inc. (NASDAQ:WAFD). PEAK6 Capital Management had $1.5 million invested in the company at the end of the quarter. Cliff Asness's AQR Capital Management also made a $1.5 million investment in the stock during the quarter. The following funds were also among the new WAFD investors: Michael Gelband's ExodusPoint Capital, Steve Cohen's Point72 Asset Management, and Matthew Tewksbury's Stevens Capital Management.
Let's go over hedge fund activity in other stocks similar to Washington Federal Inc. (NASDAQ:WAFD). We will take a look at Colony Capital Inc (NYSE:CLNY), Black Stone Minerals LP (NYSE:BSM), Louisiana-Pacific Corporation (NYSE:LPX), and CVB Financial Corp. (NASDAQ:CVBF). All of these stocks' market caps match WAFD's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position CLNY,20,420255,4 BSM,7,7850,0 LPX,31,531921,4 CVBF,12,43719,0 Average,17.5,250936,2 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 17.5 hedge funds with bullish positions and the average amount invested in these stocks was $251 million. That figure was $74 million in WAFD's case. Louisiana-Pacific Corporation (NYSE:LPX) is the most popular stock in this table. On the other hand Black Stone Minerals LP (NYSE:BSM) is the least popular one with only 7 bullish hedge fund positions. Washington Federal Inc. (NASDAQ:WAFD) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we'd rather spend our time researching stocks that hedge funds are piling on. 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. Unfortunately WAFD wasn't nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); WAFD investors were disappointed as the stock returned 0.1% during the first two months of the fourth quarter 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 in Q4.
Disclosure: None. This article was originally published at Insider Monkey.