It was a rough third quarter for many hedge funds, which were naturally unable to overcome the big dip in the broad market, as the S&P 500 fell by about 7% during the quarter. The Russell 2000, composed of smaller companies, performed even worse, trailing the S&P by about 14 percentage points between June 25 and October 30, as investors fled less-known quantities for safe havens. This was the case with hedge funds, who we heard were pulling money from the market amid the volatility, which included money from small-cap stocks, which they invest in at a higher rate than other investors. This action contributed to the greater decline in these stocks during the tumultuous period. We will study how this market volatility affected their sentiment towards Washington Federal Inc. (NASDAQ:WAFD) during the quarter below.
Is Washington Federal Inc. (NASDAQ:WAFD) a good stock to buy now? The best stock pickers are buying. The number of long hedge fund bets improved by 3 recently. WAFD was in 13 hedge funds’ portfolios at the end of September. There were 10 hedge funds in our database with WAFD positions at the end of the previous quarter. At the end of this article we will also compare WAFD to other stocks including PS Business Parks Inc (NYSE:PSB), Urban Edge Properties (NYSE:UE), and NGL Energy Partners LP (NYSE:NGL) to get a better sense of its popularity.
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To the average investor there are a lot of methods stock traders use to evaluate stocks. A couple of the best methods are hedge fund and insider trading interest. Our researchers have shown that, historically, those who follow the best picks of the best money managers can outclass the S&P 500 by a significant amount (see the details here).
Keeping this in mind, let’s review the latest action regarding Washington Federal Inc. (NASDAQ:WAFD).
Hedge fund activity in Washington Federal Inc. (NASDAQ:WAFD)
Heading into Q4, a total of 13 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 30% from the second quarter. With the smart money’s sentiment swirling, there exists a select group of key hedge fund managers who were boosting their stakes substantially (or already accumulated large positions).
Of the funds tracked by Insider Monkey, Chuck Royce’s Royce & Associates has the number one position in Washington Federal Inc. (NASDAQ:WAFD), worth close to $13.5 million, comprising 0.1% of its total 13F portfolio. Sitting at the No. 2 spot is David Dreman of Dreman Value Management, with a $12.9 million position; the fund has 1.3% of its 13F portfolio invested in the stock. Other peers with similar optimism consist of Ken Griffin’s Citadel Investment Group, Bill Miller’s Legg Mason Capital Management and Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital.
Now, key hedge funds were leading the bulls’ herd. Jabre Capital Partners, managed by Philippe Jabre, established the largest call position in Washington Federal Inc. (NASDAQ:WAFD). Jabre Capital Partners had $1.4 million invested in the company at the end of the quarter. Jim Simons’s Renaissance Technologies also initiated a $1.1 million position during the quarter. The other funds with brand new WAFD positions are Bart Baum’s Ionic Capital Management and Chao Ku’s Nine Chapters Capital Management.
Let’s check out hedge fund activity in other stocks similar to Washington Federal Inc. (NASDAQ:WAFD). These stocks are PS Business Parks Inc (NYSE:PSB), Urban Edge Properties (NYSE:UE), NGL Energy Partners LP (NYSE:NGL), and PDC Energy Inc (NASDAQ:PDCE). All of these stocks’ market caps are similar to WAFD’s market cap.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
As you can see these stocks had an average of 13 hedge funds with bullish positions and the average amount invested in these stocks was $107 million. Hedge funds invested only $74 million in WAFD, below average, which we interpret as a negative signal. PDC Energy Inc (NASDAQ:PDCE) is the most popular stock in this table, while NGL Energy Partners LP (NYSE:NGL) is at the other end of the spectrum with only 7 bullish hedge fund positions. Washington Federal Inc. (NASDAQ:WAFD) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. In this regard PDCE might be a better candidate to consider a long position.