Did Hedge Funds Make The Right Call On Wintrust Financial Corporation (WTFC) ?

How do you pick the next stock to invest in? One way would be to spend days of research browsing through thousands of publicly traded companies. However, an easier way is to look at the stocks that smart money investors are collectively bullish on. Hedge funds and other institutional investors usually invest large amounts of capital and have to conduct due diligence while choosing their next pick. They don’t always get it right, but, on average, their stock picks historically generated strong returns after adjusting for known risk factors. With this in mind, let’s take a look at the recent hedge fund activity surrounding Wintrust Financial Corporation (NASDAQ:WTFC) and determine whether hedge funds had an edge regarding this stock.

Wintrust Financial Corporation (NASDAQ:WTFC) was in 27 hedge funds’ portfolios at the end of March. WTFC investors should pay attention to an increase in activity from the world’s largest hedge funds recently. There were 21 hedge funds in our database with WTFC positions at the end of the previous quarter. Our calculations also showed that WTFC isn’t among the 30 most popular stocks among hedge funds (click for Q1 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.

In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s monthly stock picks returned 101% since March 2017 and outperformed the S&P 500 ETFs by more than 58 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.


Cliff Asness of AQR Capital Management

At Insider Monkey we scour multiple sources to uncover the next great investment idea. There is a lot of volatility in the markets and this presents amazing investment opportunities from time to time. For example, this trader claims to deliver juiced up returns with one trade a week, so we are checking out his highest conviction idea. A second trader claims to score lucrative profits by utilizing a “weekend trading strategy”, so we look into his strategy’s picks. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We recently recommended several stocks partly inspired by legendary Bill Miller’s investor letter. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 in February after realizing the coronavirus pandemic’s significance before most investors. Now we’re going to review the fresh hedge fund action encompassing Wintrust Financial Corporation (NASDAQ:WTFC).

How are hedge funds trading Wintrust Financial Corporation (NASDAQ:WTFC)?

At Q1’s end, a total of 27 of the hedge funds tracked by Insider Monkey were long this stock, a change of 29% from the fourth quarter of 2019. By comparison, 23 hedge funds held shares or bullish call options in WTFC a year ago. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

The largest stake in Wintrust Financial Corporation (NASDAQ:WTFC) was held by AQR Capital Management, which reported holding $29.1 million worth of stock at the end of September. It was followed by Citadel Investment Group with a $26.9 million position. Other investors bullish on the company included D E Shaw, Fisher Asset Management, and Renaissance Technologies. In terms of the portfolio weights assigned to each position Seidman Investment Partnership allocated the biggest weight to Wintrust Financial Corporation (NASDAQ:WTFC), around 1.21% of its 13F portfolio. Gillson Capital is also relatively very bullish on the stock, dishing out 0.98 percent of its 13F equity portfolio to WTFC.

As industrywide interest jumped, key money managers were leading the bulls’ herd. Marshall Wace LLP, managed by Paul Marshall and Ian Wace, created the most outsized position in Wintrust Financial Corporation (NASDAQ:WTFC). Marshall Wace LLP had $7.7 million invested in the company at the end of the quarter. Daniel Johnson’s Gillson Capital also made a $5.8 million investment in the stock during the quarter. The following funds were also among the new WTFC investors: Greg Eisner’s Engineers Gate Manager, Lawrence Seidman’s Seidman Investment Partnership, and Phil Stone’s Fourthstone LLC.

Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Wintrust Financial Corporation (NASDAQ:WTFC) but similarly valued. We will take a look at Amkor Technology, Inc. (NASDAQ:AMKR), First Interstate Bancsystem Inc (NASDAQ:FIBK), Commercial Metals Company (NYSE:CMC), and National General Holdings Corp (NASDAQ:NGHC). This group of stocks’ market values are closest to WTFC’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
AMKR 28 86455 -1
FIBK 7 31332 -5
CMC 19 187336 -8
NGHC 18 186028 2
Average 18 122788 -3

View table here if you experience formatting issues.

As you can see these stocks had an average of 18 hedge funds with bullish positions and the average amount invested in these stocks was $123 million. That figure was $153 million in WTFC’s case. Amkor Technology, Inc. (NASDAQ:AMKR) is the most popular stock in this table. On the other hand First Interstate Bancsystem Inc (NASDAQ:FIBK) is the least popular one with only 7 bullish hedge fund positions. Wintrust Financial Corporation (NASDAQ:WTFC) is not the most popular stock in this group but hedge fund interest is still above average. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 12.3% in 2020 through June 30th but still beat the market by 15.5 percentage points. Hedge funds were also right about betting on WTFC as the stock returned 33.7% in Q2 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.