In this article we will take a look at whether hedge funds think Washington Trust Bancorp, Inc. (NASDAQ:WASH) is a good investment right now. We check hedge fund and billionaire investor sentiment before delving into hours of research. Hedge funds spend millions of dollars on Ivy League graduates, unconventional data sources, expert networks, and get tips from investment bankers and industry insiders. Sure they sometimes fail miserably, but their consensus stock picks historically outperformed the market after adjusting for known risk factors.
Is Washington Trust Bancorp, Inc. (NASDAQ:WASH) a bargain? Money managers are taking an optimistic view. The number of long hedge fund bets went up by 2 recently. Our calculations also showed that WASH isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks). WASH was in 7 hedge funds’ portfolios at the end of March. There were 5 hedge funds in our database with WASH holdings at the end of the previous quarter.
Video: Watch our video about the top 5 most popular hedge fund stocks.
Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. 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 58 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.
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, 2020’s unprecedented market conditions provide us with the highest number of trading opportunities in a decade. So we are checking out stocks recommended/scorned by legendary Bill Miller. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind let’s take a look at the new hedge fund action encompassing Washington Trust Bancorp, Inc. (NASDAQ:WASH).
How are hedge funds trading Washington Trust Bancorp, Inc. (NASDAQ:WASH)?
Heading into the second quarter of 2020, a total of 7 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 40% from the fourth quarter of 2019. The graph below displays the number of hedge funds with bullish position in WASH over the last 18 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.
Among these funds, Renaissance Technologies held the most valuable stake in Washington Trust Bancorp, Inc. (NASDAQ:WASH), which was worth $17.3 million at the end of the third quarter. On the second spot was Millennium Management which amassed $1.9 million worth of shares. Winton Capital Management, Citadel Investment Group, and Two Sigma Advisors were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Prospector Partners allocated the biggest weight to Washington Trust Bancorp, Inc. (NASDAQ:WASH), around 0.05% of its 13F portfolio. Winton Capital Management is also relatively very bullish on the stock, dishing out 0.02 percent of its 13F equity portfolio to WASH.
As one would reasonably expect, specific money managers were leading the bulls’ herd. Millennium Management, managed by Israel Englander, initiated the biggest position in Washington Trust Bancorp, Inc. (NASDAQ:WASH). Millennium Management had $1.9 million invested in the company at the end of the quarter. Ken Griffin’s Citadel Investment Group also made a $0.4 million investment in the stock during the quarter. The only other fund with a new position in the stock is John D. Gillespie’s Prospector Partners.
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Washington Trust Bancorp, Inc. (NASDAQ:WASH) but similarly valued. These stocks are NextPoint Residential Trust Inc (NYSE:NXRT), ChipMOS TECHNOLOGIES INC. (NASDAQ:IMOS), Opus Bank (NASDAQ:OPB), and Stewart Information Services Corp (NYSE:STC). This group of stocks’ market caps are similar to WASH’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 8.75 hedge funds with bullish positions and the average amount invested in these stocks was $48 million. That figure was $21 million in WASH’s case. Stewart Information Services Corp (NYSE:STC) is the most popular stock in this table. On the other hand ChipMOS TECHNOLOGIES INC. (NASDAQ:IMOS) is the least popular one with only 2 bullish hedge fund positions. Washington Trust Bancorp, Inc. (NASDAQ:WASH) 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. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 13.9% in 2020 through June 10th and surpassed the market by 14.2 percentage points. Unfortunately WASH wasn’t nearly as popular as these 10 stocks (hedge fund sentiment was quite bearish); WASH investors were disappointed as the stock returned -7.6% during the second quarter and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.
Disclosure: None. This article was originally published at Insider Monkey.