Many investors, including Paul Tudor Jones or Stan Druckenmiller, have been saying before the Q4 market crash that the stock market is overvalued due to a low interest rate environment that leads to companies swapping their equity for debt and focusing mostly on short-term performance such as beating the quarterly earnings estimates. In the first half of 2019, most investors recovered all of their Q4 losses as sentiment shifted and optimism dominated the US China trade negotiations. Nevertheless, many of the stocks that delivered strong returns in the first half still sport strong fundamentals and their gains were more related to the general market sentiment rather than their individual performance and hedge funds kept their bullish stance. In this article we will find out how hedge fund sentiment to Northwest Bancshares, Inc. (NASDAQ:NWBI) changed recently.
Northwest Bancshares, Inc. (NASDAQ:NWBI) shareholders have witnessed an increase in activity from the world’s largest hedge funds lately. NWBI was in 13 hedge funds’ portfolios at the end of June. There were 11 hedge funds in our database with NWBI holdings at the end of the previous quarter. Our calculations also showed that NWBI isn’t among the 30 most popular stocks among hedge funds (see the video below).
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
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 market by 40 percentage points since May 2014 through May 30, 2019 (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.
Unlike former hedge manager, Dr. Steve Sjuggerud, who is convinced Dow will soar past 40000, our long-short investment strategy doesn’t rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. Let’s take a gander at the recent hedge fund action regarding Northwest Bancshares, Inc. (NASDAQ:NWBI).
Hedge fund activity in Northwest Bancshares, Inc. (NASDAQ:NWBI)
Heading into the third quarter of 2019, a total of 13 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 18% from one quarter earlier. By comparison, 9 hedge funds held shares or bullish call options in NWBI 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.
More specifically, Renaissance Technologies was the largest shareholder of Northwest Bancshares, Inc. (NASDAQ:NWBI), with a stake worth $37.1 million reported as of the end of March. Trailing Renaissance Technologies was Citadel Investment Group, which amassed a stake valued at $10.2 million. Balyasny Asset Management, Millennium Management, and GLG Partners were also very fond of the stock, giving the stock large weights in their portfolios.
As aggregate interest increased, some big names were breaking ground themselves. GLG Partners, managed by Noam Gottesman, created the most outsized position in Northwest Bancshares, Inc. (NASDAQ:NWBI). GLG Partners had $3.2 million invested in the company at the end of the quarter. Steve Cohen’s Point72 Asset Management also made a $0.3 million investment in the stock during the quarter. The only other fund with a new position in the stock is D. E. Shaw’s D E Shaw.
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Northwest Bancshares, Inc. (NASDAQ:NWBI) but similarly valued. We will take a look at FGL Holdings (NYSE:FG), SPS Commerce, Inc. (NASDAQ:SPSC), LivePerson, Inc. (NASDAQ:LPSN), and BGC Partners, Inc. (NASDAQ:BGCP). All of these stocks’ market caps are closest to NWBI’s market cap.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
View table here if you experience formatting issues.
As you can see these stocks had an average of 21 hedge funds with bullish positions and the average amount invested in these stocks was $199 million. That figure was $69 million in NWBI’s case. BGC Partners, Inc. (NASDAQ:BGCP) is the most popular stock in this table. On the other hand LivePerson, Inc. (NASDAQ:LPSN) is the least popular one with only 17 bullish hedge fund positions. Compared to these stocks Northwest Bancshares, Inc. (NASDAQ:NWBI) is even less popular than LPSN. Hedge funds dodged a bullet by taking a bearish stance towards NWBI. Our calculations showed that the top 20 most popular hedge fund stocks returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Unfortunately NWBI wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); NWBI investors were disappointed as the stock returned -5.9% during the third quarter and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as many of these stocks already outperformed the market so far in 2019.
Disclosure: None. This article was originally published at Insider Monkey.