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In this article we will analyze whether Heritage Financial Corporation (NASDAQ:HFWA) is a good investment right now by following the lead of some of the best investors in the world and piggybacking their ideas. There's no better way to get these firms' immense resources and analytical capabilities working for us than to follow their lead into their best ideas. While not all of these picks will be winners, our research shows that these picks historically outperformed the market by double digits annually.
Is Heritage Financial Corporation (NASDAQ:HFWA) a buy, sell, or hold? The best stock pickers were reducing their bets on the stock. The number of long hedge fund positions dropped by 1 lately. Heritage Financial Corporation (NASDAQ:HFWA) was in 5 hedge funds' portfolios at the end of the first quarter of 2021. The all time high for this statistic is 15. Our calculations also showed that HFWA isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings). There were 6 hedge funds in our database with HFWA positions at the end of the fourth quarter.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? Our research has shown that hedge funds' small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 115 percentage points since March 2017 (see the details here). We have been able to outperform the passive index funds by tracking the moves of corporate insiders and hedge funds, and we believe small investors can benefit a lot from reading hedge fund investor letters and 13F filings.
Paul Tudor Jones of Tudor Investment Corp
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, an activist hedge fund owns nearly 40% of this $23 biotech stock and is trying to buy the rest for around $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. Now let's take a glance at the new hedge fund action surrounding Heritage Financial Corporation (NASDAQ:HFWA).
Do Hedge Funds Think HFWA Is A Good Stock To Buy Now?
At the end of March, a total of 5 of the hedge funds tracked by Insider Monkey were long this stock, a change of -17% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in HFWA over the last 23 quarters. So, let's examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Heritage Financial Corporation (NASDAQ:HFWA) was held by Forest Hill Capital, which reported holding $9.2 million worth of stock at the end of December. It was followed by Basswood Capital with a $6.5 million position. Other investors bullish on the company included Citadel Investment Group, PDT Partners, and Tudor Investment Corp. In terms of the portfolio weights assigned to each position Forest Hill Capital allocated the biggest weight to Heritage Financial Corporation (NASDAQ:HFWA), around 2.77% of its 13F portfolio. Basswood Capital is also relatively very bullish on the stock, earmarking 0.29 percent of its 13F equity portfolio to HFWA.
Judging by the fact that Heritage Financial Corporation (NASDAQ:HFWA) has witnessed a decline in interest from the entirety of the hedge funds we track, it's easy to see that there was a specific group of fund managers who were dropping their positions entirely by the end of the first quarter. It's worth mentioning that Chuck Royce's Royce & Associates said goodbye to the largest position of the "upper crust" of funds watched by Insider Monkey, comprising about $4.2 million in stock. Michael Gelband's fund, ExodusPoint Capital, also sold off its stock, about $0.3 million worth. These bearish behaviors are important to note, as total hedge fund interest was cut by 1 funds by the end of the first quarter.
Let's check out hedge fund activity in other stocks similar to Heritage Financial Corporation (NASDAQ:HFWA). We will take a look at Vaxcyte, Inc. (NASDAQ:PCVX), Cerus Corporation (NASDAQ:CERS), G1 Therapeutics, Inc. (NASDAQ:GTHX), Triumph Group Inc (NYSE:TGI), Gracell Biotechnologies Inc. (NASDAQ:GRCL), ConnectOne Bancorp Inc (NASDAQ:CNOB), and Akero Therapeutics, Inc. (NASDAQ:AKRO). This group of stocks' market values match HFWA's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position PCVX,10,187033,-2 CERS,15,265595,1 GTHX,12,37716,-4 TGI,22,197218,4 GRCL,15,185761,15 CNOB,10,35934,-1 AKRO,15,292870,0 Average,14.1,171732,1.9 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 14.1 hedge funds with bullish positions and the average amount invested in these stocks was $172 million. That figure was $19 million in HFWA's case. Triumph Group Inc (NYSE:TGI) is the most popular stock in this table. On the other hand Vaxcyte, Inc. (NASDAQ:PCVX) is the least popular one with only 10 bullish hedge fund positions. Compared to these stocks Heritage Financial Corporation (NASDAQ:HFWA) is even less popular than PCVX. Our overall hedge fund sentiment score for HFWA 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 dodged a bullet by taking a bearish stance towards HFWA. Our calculations showed that the top 10 most popular hedge fund stocks returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 17.4% in 2021 through June 18th but managed to beat the market again by 6.1 percentage points. Unfortunately HFWA wasn't nearly as popular as these 5 stocks (hedge fund sentiment was very bearish); HFWA investors were disappointed as the stock returned -12.3% since the end of the first quarter (through 6/18) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as most of these stocks already outperformed the market since 2019.
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Disclosure: None. This article was originally published at Insider Monkey.