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In this article we will check out the progression of hedge fund sentiment towards Webster Financial Corporation (NYSE:WBS) and determine whether it is a good investment right now. We at Insider Monkey like to examine what billionaires and hedge funds think of a company before spending days of research on it. Given their 2 and 20 payment structure, hedge funds have more incentives and resources than the average investor. The funds have access to expert networks and get tips from industry insiders. They also employ numerous Ivy League graduates and MBAs. Like everyone else, hedge funds perform miserably at times, but their consensus picks have historically outperformed the market after risk adjustments.
Is WBS stock a buy or sell? Prominent investors were turning bullish. The number of bullish hedge fund positions inched up by 1 lately. Webster Financial Corporation (NYSE:WBS) was in 26 hedge funds' portfolios at the end of December. The all time high for this statistic is 33. Our calculations also showed that WBS isn't among the 30 most popular stocks among hedge funds (click for Q4 rankings).
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 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 124 percentage points since March 2017 (see the details here).
Richard S. Pzena of Pzena Investment Management
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Do Hedge Funds Think WBS Is A Good Stock To Buy Now?
At fourth quarter's end, a total of 26 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 4% from the third quarter of 2020. By comparison, 24 hedge funds held shares or bullish call options in WBS 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.
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Richard S. Pzena's Pzena Investment Management has the number one position in Webster Financial Corporation (NYSE:WBS), worth close to $113 million, amounting to 0.5% of its total 13F portfolio. The second largest stake is held by Nitorum Capital, led by Seth Rosen, holding a $66.4 million position; 2.6% of its 13F portfolio is allocated to the company. Some other peers that are bullish include Bernard Horn's Polaris Capital Management, Ken Fisher's Fisher Asset Management and Peter Rathjens, Bruce Clarke and John Campbell's Arrowstreet Capital. In terms of the portfolio weights assigned to each position Blue Grotto Capital allocated the biggest weight to Webster Financial Corporation (NYSE:WBS), around 3.74% of its 13F portfolio. Elizabeth Park Capital Management is also relatively very bullish on the stock, designating 3.12 percent of its 13F equity portfolio to WBS.
As aggregate interest increased, some big names have been driving this bullishness. Point72 Asset Management, managed by Steve Cohen, assembled the most valuable position in Webster Financial Corporation (NYSE:WBS). Point72 Asset Management had $8 million invested in the company at the end of the quarter. Karim Abbadi and Edward McBride's Centiva Capital also initiated a $0.5 million position during the quarter. The other funds with brand new WBS positions are Michael Gelband's ExodusPoint Capital, Mika Toikka's AlphaCrest Capital Management, and Qing Li's Sciencast Management.
Let's also examine hedge fund activity in other stocks - not necessarily in the same industry as Webster Financial Corporation (NYSE:WBS) but similarly valued. We will take a look at Granite Real Estate Investment Trust (NYSE:GRP), Cerence Inc. (NASDAQ:CRNC), Braskem SA (NYSE:BAK), National Fuel Gas Company (NYSE:NFG), MACOM Technology Solutions Holdings Inc (NASDAQ:MTSI), Relay Therapeutics, Inc. (NASDAQ:RLAY), and World Wrestling Entertainment, Inc. (NYSE:WWE). This group of stocks' market caps match WBS's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position GRP,6,45457,0 CRNC,14,215273,2 BAK,8,10599,0 NFG,13,88868,-3 MTSI,24,283694,-4 RLAY,17,706347,-1 WWE,29,499884,2 Average,15.9,264303,-0.6 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 15.9 hedge funds with bullish positions and the average amount invested in these stocks was $264 million. That figure was $394 million in WBS's case. World Wrestling Entertainment, Inc. (NYSE:WWE) is the most popular stock in this table. On the other hand Granite Real Estate Investment Trust (NYSE:GRP) is the least popular one with only 6 bullish hedge fund positions. Webster Financial Corporation (NYSE:WBS) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for WBS is 73.1. 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. Our calculations showed that top 30 most popular stocks among hedge funds returned 81.2% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 26 percentage points. These stocks gained 12.3% in 2021 through April 19th and still beat the market by 0.9 percentage points. Hedge funds were also right about betting on WBS as the stock returned 29.4% since the end of Q4 (through 4/19) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
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Disclosure: None. This article was originally published at Insider Monkey.