Is WestAmerica Bancorp. (WABC) A Good Stock to Buy?

Hedge fund managers like David Einhorn, Dan Loeb, or Carl Icahn became billionaires through reaping large profits for their investors, which is why piggybacking their stock picks may provide us with significant returns as well. Many hedge funds, like Paul Singer’s Elliott Management, are pretty secretive, but we can still get some insights by analyzing their quarterly 13F filings. One of the most fertile grounds for large abnormal returns is hedge funds’ most popular small-cap picks, which are not so widely followed and often trade at a discount to their intrinsic value. In this article we will check out hedge fund activity in another small-cap stock: WestAmerica Bancorp. (NASDAQ:WABC).

WestAmerica Bancorp. (NASDAQ:WABC) has seen an increase in hedge fund interest of late. There were 5 hedge funds in our database with WABC positions at the end of the second quarter, which rose to 6 by the end of the third quarter. At the end of this article we will also compare WABC to other stocks including Huron Consulting Group (NASDAQ:HURN), MaxLinear, Inc. (NYSE:MXL), and FibroGen Inc (NASDAQ:FGEN) to get a better sense of its popularity.

At Insider Monkey, we’ve developed an investment strategy that has delivered market-beating returns over the past 12 months. Our strategy identifies the 100 best-performing funds of the previous quarter from among the collection of 700+ successful funds that we track in our database, which we accomplish using our returns methodology. We then study the portfolios of those 100 funds using the latest 13F data to uncover the 30 most popular mid-cap stocks (market caps of between $1 billion and $10 billion) among them to hold until the next filing period. This strategy delivered 18% gains over the past 12 months, more than doubling the 8% returns enjoyed by the S&P 500 ETFs.

How have hedgies been trading WestAmerica Bancorp. (NASDAQ:WABC)?

At the end of the third quarter, a total of 6 of the hedge funds tracked by Insider Monkey were long this stock, a 20% increase from one quarter earlier. By comparison, 7 hedge funds held shares or bullish call options in WABC heading into this year, so hedge fund ownership of the stock has still dipped slightly in 2016. With hedge funds’ positions undergoing their usual ebb and flow, there exists a few noteworthy hedge fund managers who were increasing their holdings substantially (or already accumulated large positions).

When looking at the institutional investors followed by Insider Monkey, Renaissance Technologies, one of the largest hedge funds in the world, has the biggest position in WestAmerica Bancorp. (NASDAQ:WABC), worth close to $9.4 million. Sitting at the No. 2 spot is Folger Hill Asset Management, led by Solomon Kumin, which holds a $1.5 million position. Other members of the smart money with similar optimism comprise Cliff Asness’ AQR Capital Management, Ken Fisher’s Fisher Asset Management, and John Overdeck and David Siegel’s Two Sigma Advisors. We should note that none of these hedge funds are among our list of the 100 best performing hedge funds, which is based on the performance of their 13F long positions in non-micro-cap stocks.

Consequently, key money managers were breaking ground themselves. Folger Hill Asset Management created the biggest position in WestAmerica Bancorp. (NASDAQ:WABC).  Paul Tudor Jones’ Tudor Investment Corp also initiated a $0.3 million position during the quarter.

Let’s go over 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 Huron Consulting Group (NASDAQ:HURN), MaxLinear, Inc. (NYSE:MXL), FibroGen Inc (NASDAQ:FGEN), and Advantage Oil & Gas Ltd (USA) (NYSE:AAV). All of these stocks’ market caps are similar to WABC’s market cap.

As you can see these stocks had an average of 15 hedge funds with bullish positions and the average amount invested in these stocks was $76 million. That figure was $14 million in WABC’s case. MaxLinear, Inc. (NYSE:MXL) is the most popular stock in this table. On the other hand Advantage Oil & Gas Ltd (USA) (NYSE:AAV) is the least popular one with only 9 bullish hedge fund positions. Compared to these stocks WestAmerica Bancorp. (NASDAQ:WABC) is even less popular than AAV. Considering that hedge funds aren’t fond of this stock in relation to other companies analyzed in this article, it may be a good idea to analyze it in detail and understand why the smart money isn’t behind this stock.

Disclosure: None