In this article we are going to use hedge fund sentiment as a tool and determine whether Webster Financial Corporation (NYSE:WBS) is a good investment right now. We like to analyze hedge fund sentiment before conducting days of in-depth research. We do so because hedge funds and other elite investors have numerous Ivy League graduates, expert network advisers, and supply chain tipsters working or consulting for them. There is not a shortage of news stories covering failed hedge fund investments and it is a fact that hedge funds’ picks don’t beat the market 100% of the time, but their consensus picks have historically done very well and have outperformed the market after adjusting for risk.
Webster Financial Corporation (NYSE:WBS) investors should be aware of a decrease in hedge fund interest of late. Webster Financial Corporation (NYSE:WBS) was in 23 hedge funds’ portfolios at the end of the second quarter of 2021. The all time high for this statistic is 33. There were 27 hedge funds in our database with WBS holdings at the end of March. Our calculations also showed that WBS isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings).
In today’s marketplace there are several formulas stock market investors can use to analyze publicly traded companies. A duo of the most useful formulas are hedge fund and insider trading interest. Our experts have shown that, historically, those who follow the best picks of the top fund managers can trounce their index-focused peers by a significant amount (see the details here). Also, our monthly newsletter’s portfolio of long stock picks returned 185.4% since March 2017 (through August 2021) and beat the S&P 500 Index by more than 79 percentage points. You can download a sample issue of this newsletter on our website.
James Dondero of Highland Capital Management
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. We go through lists like the 10 best EV 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. Now let’s take a peek at the fresh hedge fund action encompassing Webster Financial Corporation (NYSE:WBS).
Do Hedge Funds Think WBS Is A Good Stock To Buy Now?
At the end of June, a total of 23 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -15% from one quarter earlier. By comparison, 30 hedge funds held shares or bullish call options in WBS a year ago. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Pzena Investment Management held the most valuable stake in Webster Financial Corporation (NYSE:WBS), which was worth $120.7 million at the end of the second quarter. On the second spot was Nitorum Capital which amassed $85.5 million worth of shares. Polaris Capital Management, Fisher Asset Management, and Holocene Advisors 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 Nitorum Capital allocated the biggest weight to Webster Financial Corporation (NYSE:WBS), around 3.89% of its 13F portfolio. One Fin Capital Management is also relatively very bullish on the stock, dishing out 3.37 percent of its 13F equity portfolio to WBS.
Since Webster Financial Corporation (NYSE:WBS) has experienced falling interest from the aggregate hedge fund industry, it’s safe to say that there is a sect of funds that slashed their entire stakes by the end of the second quarter. Intriguingly, Ben Gordon’s Blue Grotto Capital cut the biggest stake of the 750 funds watched by Insider Monkey, totaling an estimated $14.2 million in stock. Fred Cummings’s fund, Elizabeth Park Capital Management, also dumped its stock, about $5.7 million worth. These transactions are important to note, as aggregate hedge fund interest was cut by 4 funds by the end of the second quarter.
Let’s go over hedge fund activity in other stocks similar to Webster Financial Corporation (NYSE:WBS). We will take a look at FireEye Inc (NASDAQ:FEYE), The Goodyear Tire & Rubber Company (NASDAQ:GT), Simpson Manufacturing Co, Inc. (NYSE:SSD), Sprout Social, Inc. (NASDAQ:SPT), Daqo New Energy Corp (NYSE:DQ), TriNet Group Inc (NYSE:TNET), and Goosehead Insurance, Inc. (NASDAQ:GSHD). This group of stocks’ market values are closest to WBS’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| FEYE | 29 | 219042 | 4 |
| GT | 33 | 497573 | 10 |
| SSD | 19 | 198728 | -6 |
| SPT | 25 | 376276 | 1 |
| DQ | 17 | 136462 | 0 |
| TNET | 18 | 345499 | -6 |
| GSHD | 14 | 216943 | -10 |
| Average | 22.1 | 284360 | -1 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 22.1 hedge funds with bullish positions and the average amount invested in these stocks was $284 million. That figure was $419 million in WBS’s case. The Goodyear Tire & Rubber Company (NASDAQ:GT) is the most popular stock in this table. On the other hand Goosehead Insurance, Inc. (NASDAQ:GSHD) is the least popular one with only 14 bullish hedge fund positions. Webster Financial Corporation (NYSE:WBS) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for WBS is 45.6. 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. 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 October 22nd and still beat the market by 1.6 percentage points. Hedge funds were also right about betting on WBS as the stock returned 9.9% since the end of Q2 (through 10/22) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
Follow Webster Financial Corp (NYSE:WBS)
Follow Webster Financial Corp (NYSE:WBS)
Suggested Articles:
- 10 Best Railroad Stocks to Buy in 2021
- 17 safest european countries for solo female travelers
- 20 Biggest One Hit Wonders of All Time
Disclosure: None. This article was originally published at Insider Monkey.
