Hedge Funds Are Cashing Out Of West Pharmaceutical Services Inc. (WST)

At the end of February we announced the arrival of the first US recession since 2009 and we predicted that the market will decline by at least 20% in (Recession is Imminent: We Need A Travel Ban NOW). In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. In this article, we will take a closer look at hedge fund sentiment towards West Pharmaceutical Services Inc. (NYSE:WST).

Is West Pharmaceutical Services Inc. (NYSE:WST) a buy right now? Prominent investors are getting less bullish. The number of long hedge fund positions went down by 2 recently. Our calculations also showed that WST 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.

According to most investors, hedge funds are seen as worthless, outdated financial vehicles of years past. While there are more than 8000 funds trading at the moment, We look at the moguls of this group, around 850 funds. It is estimated that this group of investors handle most of all hedge funds’ total asset base, and by tracking their first-class picks, Insider Monkey has determined a number of investment strategies that have historically outstripped the market. Insider Monkey’s flagship short hedge fund strategy outperformed the S&P 500 short ETFs by around 20 percentage points annually since its inception in March 2017. Our portfolio of short stocks lost 36% since February 2017 (through May 18th) even though the market was up 30% during the same period. We just shared a list of 8 short targets in our latest quarterly update .


Ken Fisher of Fisher Asset Management

We leave no stone unturned when looking for the next great investment idea. For example, we believe electric vehicles and energy storage are set to become giant markets, and we want to take advantage of the declining lithium prices amid the COVID-19 pandemic. So we are checking out investment opportunities like these. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Now we’re going to review the key hedge fund action surrounding West Pharmaceutical Services Inc. (NYSE:WST).

How are hedge funds trading West Pharmaceutical Services Inc. (NYSE:WST)?

At the end of the first quarter, a total of 27 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -7% from the fourth quarter of 2019. The graph below displays the number of hedge funds with bullish position in WST over the last 18 quarters. With the smart money’s sentiment swirling, there exists an “upper tier” of notable hedge fund managers who were upping their holdings substantially (or already accumulated large positions).

Is WST A Good Stock To Buy?

The largest stake in West Pharmaceutical Services Inc. (NYSE:WST) was held by Fisher Asset Management, which reported holding $98.8 million worth of stock at the end of September. It was followed by Renaissance Technologies with a $55.6 million position. Other investors bullish on the company included Intermede Investment Partners, AQR Capital Management, and Millennium Management. In terms of the portfolio weights assigned to each position Intermede Investment Partners allocated the biggest weight to West Pharmaceutical Services Inc. (NYSE:WST), around 2.23% of its 13F portfolio. Winton Capital Management is also relatively very bullish on the stock, designating 0.53 percent of its 13F equity portfolio to WST.

Due to the fact that West Pharmaceutical Services Inc. (NYSE:WST) has faced bearish sentiment from the entirety of the hedge funds we track, we can see that there was a specific group of hedge funds that slashed their entire stakes last quarter. At the top of the heap, Paul Marshall and Ian Wace’s Marshall Wace LLP dumped the largest investment of the 750 funds monitored by Insider Monkey, worth an estimated $1.6 million in stock. David Andre and Astro Teller’s fund, Cerebellum Capital, also sold off its stock, about $0.6 million worth. These transactions are intriguing to say the least, as aggregate hedge fund interest was cut by 2 funds last quarter.

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as West Pharmaceutical Services Inc. (NYSE:WST) but similarly valued. These stocks are Yandex NV (NASDAQ:YNDX), NortonLifeLock Inc. (NASDAQ:NLOK), Expeditors International of Washington (NASDAQ:EXPD), and SS&C Technologies Holdings, Inc. (NASDAQ:SSNC). This group of stocks’ market values are similar to WST’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
YNDX 35 770433 -3
NLOK 42 1352392 -4
EXPD 31 346287 4
SSNC 57 1732077 -2
Average 41.25 1050297 -1.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 41.25 hedge funds with bullish positions and the average amount invested in these stocks was $1050 million. That figure was $347 million in WST’s case. SS&C Technologies Holdings, Inc. (NASDAQ:SSNC) is the most popular stock in this table. On the other hand Expeditors International of Washington (NASDAQ:EXPD) is the least popular one with only 31 bullish hedge fund positions. Compared to these stocks West Pharmaceutical Services Inc. (NYSE:WST) is even less popular than EXPD. Hedge funds clearly dropped the ball on WST as the stock delivered strong returns, though hedge funds’ consensus picks still generated respectable returns. 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 8.3% in 2020 through the end of May and still beat the market by 13.2 percentage points. A small number of hedge funds were also right about betting on WST as the stock returned 42% so far in the second quarter and outperformed the market by an even larger margin.

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Disclosure: None. This article was originally published at Insider Monkey.