The financial regulations require hedge funds and wealthy investors that exceeded the $100 million equity holdings threshold to file a report that shows their positions at the end of every quarter. Even though it isn’t the intention, these filings to a certain extent level the playing field for ordinary investors. The latest round of 13F filings disclosed the funds’ positions on September 30th, about a month before the elections. We at Insider Monkey have made an extensive database of more than 817 of those established hedge funds and famous value investors’ filings. In this article, we analyze how these elite funds and prominent investors traded WSFS Financial Corporation (NASDAQ:WSFS) based on those filings.
Is WSFS a good stock to buy now? Money managers were getting less optimistic. The number of long hedge fund bets shrunk by 5 recently. WSFS Financial Corporation (NASDAQ:WSFS) was in 12 hedge funds’ portfolios at the end of September. The all time high for this statistics is 20. Our calculations also showed that WSFS 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). There were 17 hedge funds in our database with WSFS holdings at the end of June.
Video: 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 S&P 500 ETFs by more than 66 percentage points since March 2017 (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.
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 we’re going to take a glance at the key hedge fund action encompassing WSFS Financial Corporation (NASDAQ:WSFS).
Do Hedge Funds Think WSFS Is A Good Stock To Buy Now?
At third quarter’s end, a total of 12 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -29% from the second quarter of 2020. By comparison, 11 hedge funds held shares or bullish call options in WSFS a year ago. With hedge funds’ capital changing hands, there exists a select group of notable hedge fund managers who were adding to their stakes considerably (or already accumulated large positions).
The largest stake in WSFS Financial Corporation (NASDAQ:WSFS) was held by Renaissance Technologies, which reported holding $40.6 million worth of stock at the end of September. It was followed by Pzena Investment Management with a $24.4 million position. Other investors bullish on the company included Millennium Management, Stadium Capital Management, and Private Capital Management. In terms of the portfolio weights assigned to each position Stadium Capital Management allocated the biggest weight to WSFS Financial Corporation (NASDAQ:WSFS), around 5.68% of its 13F portfolio. Private Capital Management is also relatively very bullish on the stock, designating 1.78 percent of its 13F equity portfolio to WSFS.
Due to the fact that WSFS Financial Corporation (NASDAQ:WSFS) has witnessed declining sentiment from hedge fund managers, it’s safe to say that there exists a select few funds who were dropping their full holdings in the third quarter. It’s worth mentioning that Paul Marshall and Ian Wace’s Marshall Wace LLP dropped the biggest investment of the 750 funds watched by Insider Monkey, worth about $1.1 million in stock, and Michael Gelband’s ExodusPoint Capital was right behind this move, as the fund dropped about $0.3 million worth. These transactions are intriguing to say the least, as total hedge fund interest fell by 5 funds in the third quarter.
Let’s check out hedge fund activity in other stocks similar to WSFS Financial Corporation (NASDAQ:WSFS). These stocks are Knowles Corp (NYSE:KN), MacroGenics Inc (NASDAQ:MGNX), James River Group Holdings Ltd (NASDAQ:JRVR), Trustmark Corp (NASDAQ:TRMK), Resideo Technologies, Inc. (NYSE:REZI), Monmouth Real Estate Investment Corp. (NYSE:MNR), and Sleep Number Corporation (NASDAQ:SNBR). This group of stocks’ market caps are closest to WSFS’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 19.9 hedge funds with bullish positions and the average amount invested in these stocks was $195 million. That figure was $108 million in WSFS’s case. MacroGenics Inc (NASDAQ:MGNX) is the most popular stock in this table. On the other hand James River Group Holdings Ltd (NASDAQ:JRVR) is the least popular one with only 14 bullish hedge fund positions. Compared to these stocks WSFS Financial Corporation (NASDAQ:WSFS) is even less popular than JRVR. Our overall hedge fund sentiment score for WSFS is 18. 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. Hedge funds clearly dropped the ball on WSFS as the stock delivered strong returns, though hedge funds’ consensus picks still generated respectable returns. 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 32.9% in 2020 through December 8th and still beat the market by 16.2 percentage points. A small number of hedge funds were also right about betting on WSFS as the stock returned 57.7% since Q3 (through December 8th) and outperformed the market by an even larger margin.
Disclosure: None. This article was originally published at Insider Monkey.