Hedge Funds Have Never Been This Bullish On WestAmerica Bancorp. (WABC)

“Since 2006, value stocks (IVE vs IVW) have underperformed 11 of the 13 calendar years and when they beat growth, it wasn’t by much. Cumulatively, through this week, it has been a 122% differential (up 52% for value vs up 174% for growth). This appears to be the longest and most severe drought for value investors since data collection began. It will go our way eventually as there are too many people paying far too much for today’s darlings, both public and private. Further, the ten-year yield of 2.5% (pre-tax) isn’t attractive nor is real estate. We believe the value part of the global equity market is the only place to earn solid risk adjusted returns and we believe those returns will be higher than normal,” said Vilas Fund in its Q1 investor letter. We aren’t sure whether value stocks outperform growth, but we follow hedge fund investor letters to understand where the markets and stocks might be going. This article will lay out and discuss the hedge fund and institutional investor sentiment towards WestAmerica Bancorp. (NASDAQ:WABC).

Is WestAmerica Bancorp. (NASDAQ:WABC) a good investment today? Money managers are betting on the stock. The number of bullish hedge fund bets rose by 1 recently. Our calculations also showed that WABC isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings).
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

According to most shareholders, hedge funds are assumed to be worthless, old financial vehicles of years past. While there are more than 8000 funds with their doors open at the moment, We look at the aristocrats of this club, approximately 750 funds. These investment experts control most of the smart money’s total asset base, and by observing their best equity investments, Insider Monkey has uncovered many investment strategies that have historically exceeded the market. Insider Monkey’s flagship short hedge fund strategy outrun the S&P 500 short ETFs by around 20 percentage points per annum since its inception in May 2014. Our portfolio of short stocks lost 27.8% since February 2017 (through November 21st) even though the market was up more than 39% during the same period. We just shared a list of 7 short targets in our latest quarterly update .

John Overdeck of Two Sigma

John Overdeck of Two Sigma Advisors

We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world’s largest cannabis market, so we check out this European marijuana stock pitch. One of the most bullish analysts in America just put his money where his mouth is. He says, “I’m investing more today than I did back in early 2009.” So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We also rely on the best performing hedge funds‘ buy/sell signals. We’re going to go over the fresh hedge fund action encompassing WestAmerica Bancorp. (NASDAQ:WABC).

What have hedge funds been doing with WestAmerica Bancorp. (NASDAQ:WABC)?

At the end of the third quarter, a total of 11 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 10% from one quarter earlier. By comparison, 4 hedge funds held shares or bullish call options in WABC a year ago. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

More specifically, Balyasny Asset Management was the largest shareholder of WestAmerica Bancorp. (NASDAQ:WABC), with a stake worth $10.1 million reported as of the end of September. Trailing Balyasny Asset Management was Citadel Investment Group, which amassed a stake valued at $4.3 million. Renaissance Technologies, Two Sigma Advisors, and Arrowstreet Capital 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 Balyasny Asset Management allocated the biggest weight to WestAmerica Bancorp. (NASDAQ:WABC), around 0.07% of its 13F portfolio. Tudor Investment Corp is also relatively very bullish on the stock, earmarking 0.03 percent of its 13F equity portfolio to WABC.

As one would reasonably expect, key hedge funds were leading the bulls’ herd. Winton Capital Management, managed by David Harding, established the biggest position in WestAmerica Bancorp. (NASDAQ:WABC). Winton Capital Management had $0.4 million invested in the company at the end of the quarter. Cliff Asness’s AQR Capital Management also initiated a $0.2 million position during the quarter. The only other fund with a brand new WABC position is Steve Cohen’s Point72 Asset Management.

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as WestAmerica Bancorp. (NASDAQ:WABC) but similarly valued. We will take a look at SPX FLOW, Inc. (NYSE:FLOW), Aircastle Limited (NYSE:AYR), Cardiovascular Systems Inc (NASDAQ:CSII), and Merit Medical Systems, Inc. (NASDAQ:MMSI). This group of stocks’ market valuations match WABC’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
FLOW 12 152618 -4
AYR 14 89197 2
CSII 15 126566 -2
MMSI 16 79954 -1
Average 14.25 112084 -1.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 14.25 hedge funds with bullish positions and the average amount invested in these stocks was $112 million. That figure was $22 million in WABC’s case. Merit Medical Systems, Inc. (NASDAQ:MMSI) is the most popular stock in this table. On the other hand SPX FLOW, Inc. (NYSE:FLOW) is the least popular one with only 12 bullish hedge fund positions. Compared to these stocks WestAmerica Bancorp. (NASDAQ:WABC) is even less popular than FLOW. Hedge funds dodged a bullet by taking a bearish stance towards WABC. Our calculations showed that the top 20 most popular hedge fund stocks returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately WABC wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); WABC investors were disappointed as the stock returned 5.2% during the fourth quarter (through the end of November) 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 70 percent of these stocks already outperformed the market so far in Q4.

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