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Before we spend countless hours researching a company, we like to analyze what insiders, hedge funds and billionaire investors think of the stock first. This is a necessary first step in our investment process because our research has shown that the elite investors' consensus returns have been exceptional. In the following paragraphs, we find out what the billionaire investors and hedge funds think of Western New England Bancorp, Inc. (NASDAQ:WNEB).
Western New England Bancorp, Inc. (NASDAQ:WNEB) was in 3 hedge funds' portfolios at the end of September. The all time high for this statistics is 6. WNEB investors should pay attention to a decrease in enthusiasm from smart money of late. There were 4 hedge funds in our database with WNEB positions at the end of the second quarter. Our calculations also showed that WNEB 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).
Video: Watch our video about the top 5 most popular hedge fund stocks.
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 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 underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter. Even if you aren't comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.
David Harding of Winton Capital Management
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 10 most profitable companies in the world 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 analyze the recent hedge fund action regarding Western New England Bancorp, Inc. (NASDAQ:WNEB).
What does smart money think about Western New England Bancorp, Inc. (NASDAQ:WNEB)?
At third quarter's end, a total of 3 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -25% from the second quarter of 2020. On the other hand, there were a total of 5 hedge funds with a bullish position in WNEB a year ago. So, let's find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Western New England Bancorp, Inc. (NASDAQ:WNEB) was held by Renaissance Technologies, which reported holding $9.5 million worth of stock at the end of September. It was followed by Royce & Associates with a $3.2 million position. The only other hedge fund that is bullish on the company was Winton Capital Management.
We view hedge fund activity in the stock unfavorable, but in this case there was only a single hedge fund selling its entire position: Millennium Management. One hedge fund selling its entire position doesn't always imply a bearish intent. Theoretically a hedge fund may decide to sell a promising position in order to invest the proceeds in a more promising idea. However, we don't think this is the case in this case because none of the 750+ hedge funds tracked by Insider Monkey identified WNEB as a viable investment and initiated a position in the stock.
Let's also examine hedge fund activity in other stocks - not necessarily in the same industry as Western New England Bancorp, Inc. (NASDAQ:WNEB) but similarly valued. These stocks are First Internet Bancorp (NASDAQ:INBK), L.B. Foster Company (NASDAQ:FSTR), Inmune Bio Inc. (NASDAQ:INMB), Aytu BioScience, Inc. (NASDAQ:AYTU), Orrstown Financial Services (NASDAQ:ORRF), Harrow Health, Inc. (NASDAQ:HROW), and Richmond Mutual Bancorporation, Inc. (NASDAQ:RMBI). This group of stocks' market caps are similar to WNEB's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position INBK,9,3929,1 FSTR,12,34741,0 INMB,3,4021,3 AYTU,3,80,-1 ORRF,3,3712,-1 HROW,15,33472,5 RMBI,5,3727,0 Average,7.1,11955,1 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 7.1 hedge funds with bullish positions and the average amount invested in these stocks was $12 million. That figure was $13 million in WNEB's case. Harrow Health, Inc. (NASDAQ:HROW) is the most popular stock in this table. On the other hand Inmune Bio Inc. (NASDAQ:INMB) is the least popular one with only 3 bullish hedge fund positions. Compared to these stocks Western New England Bancorp, Inc. (NASDAQ:WNEB) is even less popular than INMB. Our overall hedge fund sentiment score for WNEB is 19. 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 clearly dropped the ball on WNEB as the stock delivered strong returns, though hedge funds' consensus picks still generated respectable returns. 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 28.1% in 2020 through November 23rd and still beat the market by 15.4 percentage points. A small number of hedge funds were also right about betting on WNEB as the stock returned 13.8% since Q3 (through November 23rd) and outperformed the market by an even larger margin.
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Disclosure: None. This article was originally published at Insider Monkey.