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What Hedge Funds Say About West Corp (WSTC)?

It’s a little-known fact that stock performance is not evenly distributed (i.e. you don’t have a 50/50 chance of picking a market-beating stock). In fact, despite the S&P 500 gaining about 5.2% between November 1, 2014 and October 30, 2015, less than 49% of the stocks in the index beat the market during that time. In contrast, the 30 stocks from the index which were the most popular among the investors that we track returned 9.5% during that time and 63% of them beat the market. This shows that while hedge funds get a lot of flak from the mainstream media for their performance, it can be rewarding to follow their moves using the right sets of data. Even then, there is never a foolproof strategy to generating returns, as even the collective wisdom of top hedge funds gets it wrong some times, as in the case of some of their top picks from the index like Micron and Anadarko. The data, though, shows that following the collective wisdom of select hedge funds can be a very wise move overall.

West Corp (NASDAQ:WSTC) was in 16 hedge funds’ portfolios at the end of September. West Corp (NASDAQ:WSTC) investors should pay attention to a decrease in hedge fund interest lately. There were 23 hedge funds in our database with West Corp (NASDAQ:WSTC) positions at the end of the previous quarter. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as OM Asset Management PLC (NYSE:OMAM), South State Corporation (NASDAQ:SSB), and Science Applications International Corp (NYSE:SAIC) to gather more data points.

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According to most market participants, hedge funds are perceived as slow, outdated financial tools of the past. While there are greater than 8000 funds trading at the moment, Hedge fund experts at Insider Monkey look at the aristocrats of this group, about 700 funds. Most estimates calculate that this group of people watch over the lion’s share of the smart money’s total asset base, and by shadowing their best investments, Insider Monkey has come up with a number of investment strategies that have historically defeated the market. Insider Monkey’s small-cap hedge fund strategy beat the S&P 500 index by 12 percentage points annually for a decade in their back tests.

Now, let’s take a look at the latest action encompassing West Corp (NASDAQ:WSTC).

What have hedge funds been doing with West Corp (NASDAQ:WSTC)?

At the end of Septmber, a total of 16 of the hedge funds tracked by Insider Monkey were bullish in this stock, a decline of 30% from the previous quarter. With hedge funds’ positions undergoing their usual ebb and flow, there exists a select group of key hedge fund managers who were upping their holdings meaningfully (or already accumulated large positions).

When looking at the hedgies followed by Insider Monkey, Alyeska Investment Group, managed by Anand Parekh, holds the number one position in West Corp (NASDAQ:WSTC). Alyeska Investment Group has a $18.4 million position in the stock, comprising 0.2% of its 13F portfolio. The second largest stake is held by Citadel Investment Group, led by Ken Griffin, holding a $16.3 million position; less than 0.1%% of its 13F portfolio is allocated to the company. Remaining peers that are bullish include John Overdeck and David Siegel’s Two Sigma Advisors, James Dinan’s York Capital Management and Joel Greenblatt’s Gotham Asset Management.

Judging by the fact that West Corp (NASDAQ:WSTC) has experienced bearish sentiment from the entirety of the hedge funds we track, logic holds that there exists a select few hedgies who sold off their entire stakes last quarter. At the top of the heap, Nick Niell’s Arrowgrass Capital Partners sold off the largest stake of the 700 funds tracked by Insider Monkey, valued at close to $16.2 million in stock, and Paul Marshall and Ian Wace of Marshall Wace LLP was right behind this move, as the fund dumped about $7.2 million worth. These moves are important to note, as total hedge fund interest fell by 7 funds last quarter.

Let’s also examine hedge fund activity in other stocks similar to West Corp (NASDAQ:WSTC). We will take a look at OM Asset Management PLC (NYSE:OMAM), South State Corporation (NASDAQ:SSB), Science Applications International Corp (NYSE:SAIC), and Entegris Inc (NASDAQ:ENTG). This group of stocks’ market valuations are similar to West Corp (NASDAQ:WSTC)’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
OMAM 13 99404 -1
SSB 12 78091 3
SAIC 20 125846 2
ENTG 19 396921 5

As you can see these stocks had an average of 16 hedge funds with bullish positions and the average amount invested in these stocks was $175 million. Science Applications International Corp (NYSE:SAIC) is the most popular stock in this table. West Corp (NASDAQ:WSTC) is not the least popular stock in this group, but hedge fund interest is still below average. This is a slightly negative signal and might suggest that the stock might not gain ground in the near future, since it is not very popular among hedge funds.

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