Is Heritage Financial (HFWA) A Good Stock To Buy Now?

Hedge funds and large money managers usually invest with a focus on the long-term horizon and, therefore, short-lived dips or bumps on the charts usually don’t make them change their opinion towards a company. This time it may be different. The coronavirus pandemic destroyed the high correlations among major industries and asset classes. We are now in a stock pickers market where fundamentals of a stock have more effect on the price than the overall direction of the market. As a result we observe sudden and large changes in hedge fund positions depending on the news flow. Let’s take a look at the hedge fund sentiment towards Heritage Financial Corporation (NASDAQ:HFWA) to find out whether there were any major changes in hedge funds’ views.

Is Heritage Financial (HFWA) a good stock to buy now? The smart money was turning less bullish. The number of bullish hedge fund bets went down by 1 lately. Heritage Financial Corporation (NASDAQ:HFWA) was in 6 hedge funds’ portfolios at the end of September. The all time high for this statistics is 15. Our calculations also showed that HFWA isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video for a quick look at the top 5 stocks).

Video: Watch our video about the top 5 most popular hedge fund stocks.

To most stock holders, hedge funds are seen as underperforming, old financial tools of years past. While there are over 8000 funds trading at present, Our researchers look at the top tier of this club, approximately 850 funds. These money managers have their hands on most of all hedge funds’ total asset base, and by paying attention to their unrivaled picks, Insider Monkey has unsheathed numerous investment strategies that have historically outrun Mr. Market. Insider Monkey’s flagship short hedge fund strategy surpassed the S&P 500 short ETFs by around 20 percentage points a year since its inception in March 2017. Our portfolio of short stocks lost 13% since February 2017 (through November 17th) even though the market was up 65% during the same period. We just shared a list of 6 short targets in our latest quarterly update .

Matthew Lindenbaum Basswood Capital

Matthew Lindenbaum of Basswood Capital

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 15 best blue chip stocks to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our website. Now let’s take a peek at the new hedge fund action encompassing Heritage Financial Corporation (NASDAQ:HFWA).

What does smart money think about Heritage Financial Corporation (NASDAQ:HFWA)?

At the end of the third quarter, a total of 6 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -14% from the second quarter of 2020. On the other hand, there were a total of 10 hedge funds with a bullish position in HFWA 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.

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Mark Lee’s Forest Hill Capital has the largest position in Heritage Financial Corporation (NASDAQ:HFWA), worth close to $5 million, accounting for 2.3% of its total 13F portfolio. Coming in second is Basswood Capital, managed by Matthew Lindenbaum, which holds a $4.2 million position; the fund has 0.4% of its 13F portfolio invested in the stock. Remaining hedge funds and institutional investors with similar optimism comprise Chuck Royce’s Royce & Associates, Ken Griffin’s Citadel Investment Group and Peter Muller’s PDT Partners. In terms of the portfolio weights assigned to each position Forest Hill Capital allocated the biggest weight to Heritage Financial Corporation (NASDAQ:HFWA), around 2.25% of its 13F portfolio. Basswood Capital is also relatively very bullish on the stock, setting aside 0.35 percent of its 13F equity portfolio to HFWA.

Because Heritage Financial Corporation (NASDAQ:HFWA) has witnessed bearish sentiment from the entirety of the hedge funds we track, it’s safe to say that there were a few funds that elected to cut their full holdings heading into Q4. It’s worth mentioning that John Overdeck and David Siegel’s Two Sigma Advisors cut the biggest position of all the hedgies monitored by Insider Monkey, totaling about $0.3 million in stock. Paul Marshall and Ian Wace’s fund, Marshall Wace LLP, also said goodbye to its stock, about $0.2 million worth. These transactions are interesting, as aggregate hedge fund interest fell by 1 funds heading into Q4.

Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Heritage Financial Corporation (NASDAQ:HFWA) but similarly valued. We will take a look at Westlake Chemical Partners LP (NYSE:WLKP), Third Point Reinsurance Ltd (NYSE:TPRE), Maverix Metals Inc. (NYSE:MMX), Bain Capital Specialty Finance, Inc. (NYSE:BCSF), LeMaitre Vascular Inc (NASDAQ:LMAT), Argan, Inc. (NYSE:AGX), and BJ’s Restaurants, Inc. (NASDAQ:BJRI). All of these stocks’ market caps are closest to HFWA’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
WLKP 2 1933 -2
TPRE 19 29902 1
MMX 8 91332 3
BCSF 11 16870 0
LMAT 7 5081 -2
AGX 13 61268 2
BJRI 14 43978 2
Average 10.6 35766 0.6

View table here if you experience formatting issues.

As you can see these stocks had an average of 10.6 hedge funds with bullish positions and the average amount invested in these stocks was $36 million. That figure was $14 million in HFWA’s case. Third Point Reinsurance Ltd (NYSE:TPRE) is the most popular stock in this table. On the other hand Westlake Chemical Partners LP (NYSE:WLKP) is the least popular one with only 2 bullish hedge fund positions. Heritage Financial Corporation (NASDAQ:HFWA) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for HFWA is 27.8. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 30.7% in 2020 through November 27th and still beat the market by 16.1 percentage points. A small number of hedge funds were also right about betting on HFWA as the stock returned 33.6% since the end of the third quarter (through 11/27) and outperformed the market by an even larger margin.

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