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

Like everyone else, elite investors make mistakes. Some of their top consensus picks, such as Amazon, Facebook and Alibaba, have not done well in Q4 due to various reasons. Nevertheless, the data show elite investors’ consensus picks have done well on average over the long-term. The top 20 stocks among hedge funds beat the S&P 500 Index ETF by 4 percentage points so far this year. Because their consensus picks have done well, we pay attention to what elite funds think before doing extensive research on a stock. In this article, we take a closer look at WestAmerica Bancorporation (NASDAQ:WABC) from the perspective of those elite funds.

WestAmerica Bancorporation (NASDAQ:WABC) has seen an increase in enthusiasm from smart money lately. Our calculations also showed that WABC isn’t among the 30 most popular stocks among hedge funds (see the video below).
5 Most Popular Stocks Among Hedge Funds
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.

John Overdeck of Two Sigma

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 view the latest hedge fund action surrounding WestAmerica Bancorporation (NASDAQ:WABC).

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

Heading into the third quarter of 2019, a total of 10 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 67% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards WABC over the last 16 quarters. With hedgies’ capital changing hands, there exists an “upper tier” of notable hedge fund managers who were upping their holdings substantially (or already accumulated large positions).

No of Hedge Funds with WABC Positions

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Dmitry Balyasny’s Balyasny Asset Management has the most valuable position in WestAmerica Bancorporation (NASDAQ:WABC), worth close to $9.2 million, accounting for 0.1% of its total 13F portfolio. Sitting at the No. 2 spot is Citadel Investment Group, led by Ken Griffin, holding a $4.2 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Other members of the smart money that hold long positions include Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital, John Overdeck and David Siegel’s Two Sigma Advisors and D. E. Shaw’s D E Shaw.

Now, key hedge funds have been driving this bullishness. Citadel Investment Group, managed by Ken Griffin, initiated the largest position in WestAmerica Bancorporation (NASDAQ:WABC). Citadel Investment Group had $4.2 million invested in the company at the end of the quarter. Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital also made a $1.6 million investment in the stock during the quarter. The other funds with new positions in the stock are D. E. Shaw’s D E Shaw, Renaissance Technologies, and Israel Englander’s Millennium Management.

Let’s also examine hedge fund activity in other stocks similar to WestAmerica Bancorporation (NASDAQ:WABC). These stocks are Ironwood Pharmaceuticals, Inc. (NASDAQ:IRWD), Walker & Dunlop Inc. (NYSE:WD), Upwork Inc. (NASDAQ:UPWK), and Prestige Consumer Healthcare Inc. (NYSE:PBH). All of these stocks’ market caps resemble WABC’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
IRWD 21 305653 -2
WD 15 64830 1
UPWK 10 50349 1
PBH 15 66050 2
Average 15.25 121721 0.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 15.25 hedge funds with bullish positions and the average amount invested in these stocks was $122 million. That figure was $19 million in WABC’s case. Ironwood Pharmaceuticals, Inc. (NASDAQ:IRWD) is the most popular stock in this table. On the other hand Upwork Inc. (NASDAQ:UPWK) is the least popular one with only 10 bullish hedge fund positions. Compared to these stocks WestAmerica Bancorporation (NASDAQ:WABC) is even less popular than UPWK. 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 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 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 1.6% 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.

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