Most investors tend to think that hedge funds and other asset managers are worthless, as they cannot beat even simple index fund portfolios. In fact, most people expect hedge funds to compete with and outperform the bull market that we have witnessed in recent years. However, hedge funds are generally partially hedged and aim at delivering attractive risk-adjusted returns rather than following the ups and downs of equity markets hoping that they will outperform the broader market. Our research shows that certain hedge funds do have great stock picking skills (and we can identify these hedge funds in advance pretty accurately), so let’s take a glance at the smart money sentiment towards Great Western Bancorp Inc (NYSE:GWB).
Great Western Bancorp Inc (NYSE:GWB) was in 14 hedge funds’ portfolios at the end of March. GWB has experienced an increase in hedge fund interest in recent months. There were 11 hedge funds in our database with GWB positions at the end of the previous quarter. Our calculations also showed that GWB isn’t among the 30 most popular stocks among hedge funds.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? 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. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in our short portfolio.
We’re going to take a look at the recent hedge fund action encompassing Great Western Bancorp Inc (NYSE:GWB).
How are hedge funds trading Great Western Bancorp Inc (NYSE:GWB)?
At the end of the first quarter, a total of 14 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 27% from the fourth quarter of 2018. Below, you can check out the change in hedge fund sentiment towards GWB over the last 15 quarters. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Great Western Bancorp Inc (NYSE:GWB) was held by Millennium Management, which reported holding $11.4 million worth of stock at the end of March. It was followed by Renaissance Technologies with a $11.4 million position. Other investors bullish on the company included Marshall Wace LLP, D E Shaw, and Citadel Investment Group.
With a general bullishness amongst the heavyweights, key money managers have been driving this bullishness. Tudor Investment Corp, managed by Paul Tudor Jones, assembled the largest position in Great Western Bancorp Inc (NYSE:GWB). Tudor Investment Corp had $0.9 million invested in the company at the end of the quarter. John Overdeck and David Siegel’s Two Sigma Advisors also initiated a $0.4 million position during the quarter. The other funds with brand new GWB positions are Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital, Andrew Feldstein and Stephen Siderow’s Blue Mountain Capital, and Mike Vranos’s Ellington.
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Great Western Bancorp Inc (NYSE:GWB) but similarly valued. These stocks are Tri Pointe Group Inc (NYSE:TPH), Diodes Incorporated (NASDAQ:DIOD), PriceSmart, Inc. (NASDAQ:PSMT), and BGC Partners, Inc. (NASDAQ:BGCP). This group of stocks’ market values match GWB’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| TPH | 18 | 134709 | 3 |
| DIOD | 19 | 95633 | 4 |
| PSMT | 10 | 41769 | 2 |
| BGCP | 26 | 252988 | 3 |
| Average | 18.25 | 131275 | 3 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 18.25 hedge funds with bullish positions and the average amount invested in these stocks was $131 million. That figure was $56 million in GWB’s case. BGC Partners, Inc. (NASDAQ:BGCP) is the most popular stock in this table. On the other hand PriceSmart, Inc. (NASDAQ:PSMT) is the least popular one with only 10 bullish hedge fund positions. Great Western Bancorp Inc (NYSE:GWB) is not the least popular stock in this group but hedge fund interest is still below average. Our calculations showed that top 20 most popular stocks among hedge funds returned 6.2% in Q2 through June 19th and outperformed the S&P 500 ETF (SPY) by nearly 3 percentage points. A small number of hedge funds were also right about betting on GWB as the stock returned 8.5% during the same time frame and outperformed the market by an even larger margin.
Disclosure: None. This article was originally published at Insider Monkey.
