Out of thousands of stocks that are currently traded on the market, it is difficult to identify those that will really generate strong returns. Hedge funds and institutional investors spend millions of dollars on analysts with MBAs and PhDs, who are industry experts and well connected to other industry and media insiders on top of that. Individual investors can piggyback the hedge funds employing these talents and can benefit from their vast resources and knowledge in that way. We analyze quarterly 13F filings of nearly 750 hedge funds and, by looking at the smart money sentiment that surrounds a stock, we can determine whether it has the potential to beat the market over the long-term. Therefore, let’s take a closer look at what smart money thinks about Northwest Bancshares, Inc. (NASDAQ:NWBI).
Northwest Bancshares, Inc. (NASDAQ:NWBI) investors should pay attention to an increase in hedge fund sentiment in recent months. NWBI was in 18 hedge funds' portfolios at the end of the third quarter of 2019. There were 13 hedge funds in our database with NWBI positions at the end of the previous quarter. Our calculations also showed that NWBI 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.
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 flagship best performing hedge funds strategy returned 91% since May 2014 and outperformed the Russell 2000 ETFs by nearly 40 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That's why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
[caption id="attachment_746893" align="aligncenter" width="473"] Paul Marshall of Marshall Wace[/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 take a gander at the latest hedge fund action surrounding Northwest Bancshares, Inc. (NASDAQ:NWBI).
How are hedge funds trading Northwest Bancshares, Inc. (NASDAQ:NWBI)?
At Q3's end, a total of 18 of the hedge funds tracked by Insider Monkey were long this stock, a change of 38% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards NWBI over the last 17 quarters. So, let's check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Renaissance Technologies was the largest shareholder of Northwest Bancshares, Inc. (NASDAQ:NWBI), with a stake worth $28.5 million reported as of the end of September. Trailing Renaissance Technologies was Balyasny Asset Management, which amassed a stake valued at $8.7 million. Millennium Management, Citadel Investment Group, and Marshall Wace 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 Minerva Advisors allocated the biggest weight to Northwest Bancshares, Inc. (NASDAQ:NWBI), around 0.65% of its 13F portfolio. Caxton Associates is also relatively very bullish on the stock, earmarking 0.08 percent of its 13F equity portfolio to NWBI.
With a general bullishness amongst the heavyweights, specific money managers have been driving this bullishness. Marshall Wace, managed by Paul Marshall and Ian Wace, assembled the biggest position in Northwest Bancshares, Inc. (NASDAQ:NWBI). Marshall Wace had $4.4 million invested in the company at the end of the quarter. Paul Tudor Jones's Tudor Investment Corp also initiated a $0.9 million position during the quarter. The following funds were also among the new NWBI investors: Donald Sussman's Paloma Partners, Bruce Kovner's Caxton Associates, and Benjamin A. Smith's Laurion Capital Management.
Let's also examine hedge fund activity in other stocks similar to Northwest Bancshares, Inc. (NASDAQ:NWBI). We will take a look at ForeScout Technologies, Inc. (NASDAQ:FSCT), Cavco Industries, Inc. (NASDAQ:CVCO), Frontline Ltd (NYSE:FRO), and Prestige Consumer Healthcare Inc. (NYSE:PBH). This group of stocks' market values match NWBI's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position FSCT,19,281431,1 CVCO,19,171104,3 FRO,14,99604,1 PBH,17,73601,2 Average,17.25,156435,1.75 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 17.25 hedge funds with bullish positions and the average amount invested in these stocks was $156 million. That figure was $68 million in NWBI's case. ForeScout Technologies, Inc. (NASDAQ:FSCT) is the most popular stock in this table. On the other hand Frontline Ltd (NYSE:FRO) is the least popular one with only 14 bullish hedge fund positions. Northwest Bancshares, Inc. (NASDAQ:NWBI) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but 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 NWBI wasn't nearly as popular as these 20 stocks and hedge funds that were betting on NWBI were disappointed as the stock returned 2.6% 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 many of these stocks already outperformed the market so far this year.
Disclosure: None. This article was originally published at Insider Monkey.