Hedge Funds Are Selling West Pharmaceutical Services Inc. (WST)

The 700+ hedge funds and money managers tracked by Insider Monkey have already compiled and submitted their 13F filings for the third quarter, which unveil their equity positions as of September 30. We went through these filings, fixed typos and other more significant errors and identified the changes in hedge fund positions. Our extensive review of these public filings is finally over, so this article is set to reveal the smart money sentiment towards West Pharmaceutical Services Inc. (NYSE:WST).

West Pharmaceutical Services Inc. (NYSE:WST) shareholders have witnessed a decrease in hedge fund sentiment of late. There were 138 hedge funds in our database with WST holdings at the end of the 2016 third quarter. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Twilio Inc(NYSE:TWLO), Empresa Nacional de Electricidad S.A. (NYSE:EOCC), and Aqua America Inc (NYSE:WTR) to gather more data points.

We care about hedge fund sentiment because historically hedge funds’ stock picks delivered strong risk adjusted returns. There are certain segments of the market where hedge funds’ stock picks performed much better than its benchmarks. For instance, the 30 most popular mid-cap stocks among the best performing hedge funds returned 18% over the last 12 months outpacing S&P 500 Index by more than 10 percentage points. We developed this strategy 2.5 years ago and started sharing its picks in our quarterly newsletter. It bested the S&P 500 Index ETFs by delivering a solid 39% vs. 22% gain for its benchmarks.

Now, we’re going to check out the key action encompassing West Pharmaceutical Services Inc. (NYSE:WST).

What does the smart money think about West Pharmaceutical Services Inc. (NYSE:WST)?

At Q3’s end, a total of 13 of the hedge funds tracked by Insider Monkey were bullish on this stock, a drop of 28% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards WST over the last 5 quarters. With hedge funds’ positions undergoing their usual ebb and flow, there exists a few key hedge fund managers who were increasing their stakes considerably (or already accumulated large positions).

Of the funds tracked by Insider Monkey, Select Equity Group, led by Robert Joseph Caruso, holds the number one position in West Pharmaceutical Services Inc. (NYSE:WST). According to its latest 13F filing, the fund has a $179.9 million position in the stock, comprising 1.6% of its 13F portfolio. The second largest stake is held by Ken Fisher of Fisher Asset Management, with a $91.1 million position; 0.2% of its 13F portfolio is allocated to the company. Other professional money managers that are bullish comprise Cliff Asness’s AQR Capital Management, Israel Englander’s Millennium Management and Ken Griffin’s Citadel Investment Group. We should note that none of these hedge funds are among our list of the 100 best performing hedge funds which is based on the performance of their 13F long positions in non-microcap stocks.

Now that we’ve mentioned the most bullish investors, let’s also take a look at some funds that cut their entire stakes in the stock during the third quarter. It’s worth mentioning that Ben Levine, Andrew Manuel and Stefan Renold’s LMR Partners cut the largest position of the “upper crust” of funds tracked by Insider Monkey, totaling an estimated $3.7 million in stock. Jim Simons’s fund, Renaissance Technologies, also cut its stock, about $3.5 million worth of West Pharmaceutical shares.

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 Twilio Inc (NYSE:TWLO), Empresa Nacional de Electricidad S.A. (NYSE:EOCC), Aqua America Inc (NYSE:WTR), and Arris Group, Inc. (NASDAQ:ARRS). This group of stocks’ market valuations are similar to WST’s market valuation.

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 $373 million. That figure was $334 million in WST’s case. Arris Group, Inc. (NASDAQ:ARRS) is the most popular stock in this table. On the other hand Twilio Inc (NYSE:TWLO) is the least popular one with only 9 bullish hedge fund positions. West Pharmaceutical Services Inc. (NYSE:WST) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. In this regard ARRS might be a better candidate to consider taking a long position in.

Disclosure: none.