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 West Fraser Timber Co. Ltd. (NYSE:WFG).
Is West Fraser Timber Co. Ltd. (NYSE:WFG) the right pick for your portfolio? Money managers were getting more optimistic. The number of long hedge fund positions inched up by 25 lately. West Fraser Timber Co. Ltd. (NYSE:WFG) was in 25 hedge funds’ portfolios at the end of the first quarter of 2021. Our calculations also showed that WFG isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings).
Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. 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 115 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.
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, economists warn of inflation flare up. So, we are checking out this backdoor gold play that has hit peak gains of 718% in a little over a year. We go through lists like the 10 best battery stocks to pick the next Tesla that will deliver a 10x return. 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 homepage. Keeping this in mind we’re going to take a look at the new hedge fund action regarding West Fraser Timber Co. Ltd. (NYSE:WFG).
Do Hedge Funds Think WFG Is A Good Stock To Buy Now?
At Q1’s end, a total of 25 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 25 from the fourth quarter of 2020. Below, you can check out the change in hedge fund sentiment towards WFG over the last 23 quarters. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Impala Asset Management held the most valuable stake in West Fraser Timber Co. Ltd. (NYSE:WFG), which was worth $143.7 million at the end of the fourth quarter. On the second spot was Arrowstreet Capital which amassed $133.2 million worth of shares. Waratah Capital Advisors, Scopus Asset Management, and Balyasny Asset Management were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Impala Asset Management allocated the biggest weight to West Fraser Timber Co. Ltd. (NYSE:WFG), around 9.44% of its 13F portfolio. NewGen Asset Management is also relatively very bullish on the stock, dishing out 4.96 percent of its 13F equity portfolio to WFG.
As aggregate interest increased, key money managers have jumped into West Fraser Timber Co. Ltd. (NYSE:WFG) headfirst. Impala Asset Management, managed by Robert Bishop, established the biggest position in West Fraser Timber Co. Ltd. (NYSE:WFG). Impala Asset Management had $143.7 million invested in the company at the end of the quarter. Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital also made a $133.2 million investment in the stock during the quarter. The other funds with new positions in the stock are Brad Dunkley and Blair Levinsky’s Waratah Capital Advisors, Alexander Mitchell’s Scopus Asset Management, and Dmitry Balyasny’s Balyasny Asset Management.
Let’s check out hedge fund activity in other stocks similar to West Fraser Timber Co. Ltd. (NYSE:WFG). These stocks are Vornado Realty Trust (NYSE:VNO), Mirati Therapeutics, Inc. (NASDAQ:MRTX), Carlisle Companies, Inc. (NYSE:CSL), Service Corporation International (NYSE:SCI), GSX Techedu Inc. (NYSE:GSX), Alaska Air Group, Inc. (NYSE:ALK), and Assurant, Inc. (NYSE:AIZ). This group of stocks’ market valuations resemble WFG’s market valuation.
|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 30.3 hedge funds with bullish positions and the average amount invested in these stocks was $839 million. That figure was $581 million in WFG’s case. Mirati Therapeutics, Inc. (NASDAQ:MRTX) is the most popular stock in this table. On the other hand Carlisle Companies, Inc. (NYSE:CSL) is the least popular one with only 18 bullish hedge fund positions. West Fraser Timber Co. Ltd. (NYSE:WFG) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for WFG is 24.4. 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 negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 24% in 2021 through July 9th and surpassed the market again by 6.7 percentage points. Unfortunately WFG wasn’t nearly as popular as these 5 stocks (hedge fund sentiment was quite bearish); WFG investors were disappointed as the stock returned 4.4% since the end of March (through 7/9) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2021.
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Disclosure: None. This article was originally published at Insider Monkey.