At Insider Monkey, we pore over the filings of nearly 750 top investment firms every quarter, a process we have now completed for the latest reporting period. The data we’ve gathered as a result gives us access to a wealth of collective knowledge based on these firms’ portfolio holdings as of September 30. In this article, we will use that wealth of knowledge to determine whether or not Westpac Banking Corporation (NYSE:WBK) makes for a good investment right now.
Westpac Banking Corporation (NYSE:WBK) was in 4 hedge funds’ portfolios at the end of the third quarter of 2019. WBK investors should pay attention to an increase in activity from the world’s largest hedge funds recently. There were 3 hedge funds in our database with WBK holdings at the end of the previous quarter. Our calculations also showed that WBK isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings).
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
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 Russell 2000 ETFs by 40 percentage points since May 2014 (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 stocks that are in our short portfolio.
We leave no stone unturned when looking for the next great investment idea. For example Discover is offering this insane cashback card, so we look into shorting the stock. 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 even check out this option genius’ weekly trade ideas. This December, we recommended Adams Energy as a one-way bet based on an under-the-radar fund manager’s investor letter and the stock already gained 20 percent. Now we’re going to analyze the fresh hedge fund action regarding Westpac Banking Corporation (NYSE:WBK).
What have hedge funds been doing with Westpac Banking Corporation (NYSE:WBK)?
At the end of the third quarter, a total of 4 of the hedge funds tracked by Insider Monkey were long this stock, a change of 33% from the previous quarter. By comparison, 6 hedge funds held shares or bullish call options in WBK a year ago. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
According to Insider Monkey’s hedge fund database, Renaissance Technologies has the biggest position in Westpac Banking Corporation (NYSE:WBK), worth close to $41.3 million, accounting for less than 0.1%% of its total 13F portfolio. On Renaissance Technologies’s heels is Fisher Asset Management, led by Ken Fisher, holding a $0.4 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Remaining peers with similar optimism comprise Ken Griffin’s Citadel Investment Group, David E. Shaw’s D E Shaw and . In terms of the portfolio weights assigned to each position Renaissance Technologies allocated the biggest weight to Westpac Banking Corporation (NYSE:WBK), around 0.03% of its 13F portfolio. D E Shaw is also relatively very bullish on the stock, setting aside 0.0005 percent of its 13F equity portfolio to WBK.
As one would reasonably expect, key money managers have been driving this bullishness. D E Shaw, managed by David E. Shaw, assembled the most outsized position in Westpac Banking Corporation (NYSE:WBK). D E Shaw had $0.4 million invested in the company at the end of the quarter.
Let’s check out hedge fund activity in other stocks similar to Westpac Banking Corporation (NYSE:WBK). We will take a look at Becton, Dickinson and Company (NYSE:BDX), The TJX Companies, Inc. (NYSE:TJX), T-Mobile US, Inc. (NASDAQ:TMUS), and Banco Santander, S.A. (NYSE:SAN). All of these stocks’ market caps resemble WBK’s market cap.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
View table here if you experience formatting issues.
As you can see these stocks had an average of 43 hedge funds with bullish positions and the average amount invested in these stocks was $1307 million. That figure was $43 million in WBK’s case. T-Mobile US, Inc. (NASDAQ:TMUS) is the most popular stock in this table. On the other hand Banco Santander, S.A. (NYSE:SAN) is the least popular one with only 20 bullish hedge fund positions. Compared to these stocks Westpac Banking Corporation (NYSE:WBK) is even less popular than SAN. Hedge funds dodged a bullet by taking a bearish stance towards WBK. 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 WBK wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); WBK investors were disappointed as the stock returned -14.6% 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.