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In this article you are going to find out whether hedge funds think WestAmerica Bancorp. (NASDAQ:WABC) is a good investment right now. We like to check what the smart money thinks first before doing extensive research on a given stock. Although there have been several high profile failed hedge fund picks, the consensus picks among hedge fund investors have historically outperformed the market after adjusting for known risk attributes. It's not surprising given that hedge funds have access to better information and more resources to predict the winners in the stock market.
WestAmerica Bancorp. (NASDAQ:WABC) shares haven't seen a lot of action during the second quarter. Overall, hedge fund sentiment was unchanged. The stock was in 12 hedge funds' portfolios at the end of September. Our calculations also showed that WABC isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video for a quick look at the top 5 stocks). At the end of this article we will also compare WABC to other stocks including Nova Measuring Instruments Ltd. (NASDAQ:NVMI), MicroStrategy Incorporated (NASDAQ:MSTR), and La-Z-Boy Incorporated (NYSE:LZB) to get a better sense of its popularity.
Video: Watch our video about the top 5 most popular hedge fund stocks.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 66 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 13% through November 17th. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Donald Sussman of Paloma Partners
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 15 best blue chip stocks to pick the best large-cap stocks to buy. 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 website. Now let's take a look at the recent hedge fund action encompassing WestAmerica Bancorp. (NASDAQ:WABC).
Do Hedge Funds Think WABC Is A Good Stock To Buy Now?
Heading into the fourth quarter of 2020, a total of 12 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 0% from the previous quarter. By comparison, 11 hedge funds held shares or bullish call options in WABC 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.
More specifically, Marshall Wace LLP was the largest shareholder of WestAmerica Bancorp. (NASDAQ:WABC), with a stake worth $6.5 million reported as of the end of September. Trailing Marshall Wace LLP was Millennium Management, which amassed a stake valued at $3.8 million. Winton Capital Management, Renaissance Technologies, and Citadel Investment Group 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 Winton Capital Management allocated the biggest weight to WestAmerica Bancorp. (NASDAQ:WABC), around 0.11% of its 13F portfolio. Tudor Investment Corp is also relatively very bullish on the stock, earmarking 0.04 percent of its 13F equity portfolio to WABC.
Seeing as WestAmerica Bancorp. (NASDAQ:WABC) has witnessed declining sentiment from the entirety of the hedge funds we track, we can see that there were a few funds who sold off their positions entirely heading into Q4. It's worth mentioning that Noam Gottesman's GLG Partners sold off the biggest stake of the 750 funds monitored by Insider Monkey, valued at an estimated $0.4 million in stock, and Brandon Haley's Holocene Advisors was right behind this move, as the fund sold off about $0.3 million worth. These moves are important to note, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).
Let's now take a look at hedge fund activity in other stocks - not necessarily in the same industry as WestAmerica Bancorp. (NASDAQ:WABC) but similarly valued. We will take a look at Nova Measuring Instruments Ltd. (NASDAQ:NVMI), MicroStrategy Incorporated (NASDAQ:MSTR), La-Z-Boy Incorporated (NYSE:LZB), Onto Innovation Inc. (NYSE:ONTO), Health Catalyst, Inc (NASDAQ:HCAT), Domtar Corporation (NYSE:UFS), and American Assets Trust, Inc (NYSE:AAT). This group of stocks' market values are closest to WABC's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position NVMI,11,212026,-2 MSTR,20,87203,-6 LZB,20,67843,-1 ONTO,15,114223,-2 HCAT,14,130755,1 UFS,24,218760,-3 AAT,15,29076,-5 Average,17,122841,-2.6 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 17 hedge funds with bullish positions and the average amount invested in these stocks was $123 million. That figure was $23 million in WABC's case. Domtar Corporation (NYSE:UFS) is the most popular stock in this table. On the other hand Nova Measuring Instruments Ltd. (NASDAQ:NVMI) is the least popular one with only 11 bullish hedge fund positions. WestAmerica Bancorp. (NASDAQ:WABC) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for WABC is 38.8. 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. 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 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 32.9% in 2020 through December 8th and surpassed the market again by 16.2 percentage points. Unfortunately WABC wasn't nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); WABC investors were disappointed as the stock returned 1.2% since the end of September (through 12/8) 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 most of these stocks already outperformed the market in 2020.
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Disclosure: None. This article was originally published at Insider Monkey.