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 Hancock Whitney Corporation (NASDAQ:HWC) and determine whether hedge funds had an edge regarding this stock.
Is Hancock Whitney Corporation (NASDAQ:HWC) a healthy stock for your portfolio? Prominent investors were getting more bullish. The number of long hedge fund bets advanced by 3 recently. Hancock Whitney Corporation (NASDAQ:HWC) was in 23 hedge funds’ portfolios at the end of June. The all time high for this statistics is 24. Our calculations also showed that HWC isn’t among the 30 most popular stocks among hedge funds (click for Q2 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 56 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.
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 precious metals prices. So, we are checking out this lithium company which could also benefit from the electric car adoption. 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 to get excerpts of these letters in your inbox. Now let’s go over the fresh hedge fund action encompassing Hancock Whitney Corporation (NASDAQ:HWC).
How are hedge funds trading Hancock Whitney Corporation (NASDAQ:HWC)?
Heading into the third quarter of 2020, a total of 23 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 15% from the previous quarter. On the other hand, there were a total of 16 hedge funds with a bullish position in HWC a year ago. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Hancock Whitney Corporation (NASDAQ:HWC) was held by Millennium Management, which reported holding $11.7 million worth of stock at the end of September. It was followed by Citadel Investment Group with a $11.2 million position. Other investors bullish on the company included Arrowstreet Capital, Forest Hill Capital, and Gillson Capital. In terms of the portfolio weights assigned to each position Forest Hill Capital allocated the biggest weight to Hancock Whitney Corporation (NASDAQ:HWC), around 3.41% of its 13F portfolio. Elizabeth Park Capital Management is also relatively very bullish on the stock, setting aside 2.26 percent of its 13F equity portfolio to HWC.
Consequently, some big names have jumped into Hancock Whitney Corporation (NASDAQ:HWC) headfirst. Elizabeth Park Capital Management, managed by Fred Cummings, established the largest position in Hancock Whitney Corporation (NASDAQ:HWC). Elizabeth Park Capital Management had $3.6 million invested in the company at the end of the quarter. Noam Gottesman’s GLG Partners also initiated a $1.7 million position during the quarter. The following funds were also among the new HWC investors: Brandon Haley’s Holocene Advisors, Michael Gelband’s ExodusPoint Capital, and Donald Sussman’s Paloma Partners.
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Hancock Whitney Corporation (NASDAQ:HWC) but similarly valued. We will take a look at Monro Inc (NASDAQ:MNRO), Aurinia Pharmaceuticals Inc (NASDAQ:AUPH), Washington Real Estate Investment Trust (NYSE:WRE), Atlantic Union Bankshares Corporation (NASDAQ:AUB), Magellan Health Inc (NASDAQ:MGLN), Healthcare Services Group, Inc. (NASDAQ:HCSG), and International Game Technology PLC (NYSE:IGT). This group of stocks’ market caps are similar to HWC’s market cap.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
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As you can see these stocks had an average of 19 hedge funds with bullish positions and the average amount invested in these stocks was $180 million. That figure was $77 million in HWC’s case. Aurinia Pharmaceuticals Inc (NASDAQ:AUPH) is the most popular stock in this table. On the other hand Washington Real Estate Investment Trust (NYSE:WRE) is the least popular one with only 8 bullish hedge fund positions. Hancock Whitney Corporation (NASDAQ:HWC) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for HWC is 72.5. 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 positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. 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 24.8% in 2020 through the end of September and beat the market by 19.3 percentage points. Unfortunately HWC wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on HWC were disappointed as the stock returned -10.1% in Q3 and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.
Disclosure: None. This article was originally published at Insider Monkey.