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Webster Financial (WBS): Hedge Funds Are Taking Some Chips Off The Table

Insider Monkey has processed numerous 13F filings of hedge funds and successful value investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds’ and successful investors’ positions as of the end of the second quarter. You can find articles about an individual hedge fund’s trades on numerous financial news websites. However, in this article we will take a look at their collective moves over the last 5 years and analyze what the smart money thinks of Webster Financial Corporation (NYSE:WBS) based on that data and determine whether they were really smart about the stock.

Webster Financial Corporation (NYSE:WBS) shareholders have witnessed a decrease in enthusiasm from smart money in recent months. Webster Financial Corporation (NYSE:WBS) was in 30 hedge funds’ portfolios at the end of June. The all time high for this statistics is 33. There were 33 hedge funds in our database with WBS holdings at the end of March. Our calculations also showed that WBS isn’t among the 30 most popular stocks among hedge funds (click for Q2 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.

At the moment there are many methods stock traders put to use to assess publicly traded companies. A couple of the most innovative methods are hedge fund and insider trading moves. We have shown that, historically, those who follow the best picks of the elite money managers can trounce the market by a superb amount (see the details here).

David E. Shaw of D.E. Shaw

David E. Shaw of D.E. Shaw

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We go through lists like the 10 most profitable companies in the world 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. With all of this in mind we’re going to take a gander at the recent hedge fund action surrounding Webster Financial Corporation (NYSE:WBS).

Hedge fund activity in Webster Financial Corporation (NYSE:WBS)

At the end of June, a total of 30 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -9% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in WBS over the last 20 quarters. With hedgies’ positions undergoing their usual ebb and flow, there exists an “upper tier” of key hedge fund managers who were upping their stakes meaningfully (or already accumulated large positions).

The largest stake in Webster Financial Corporation (NYSE:WBS) was held by Pzena Investment Management, which reported holding $65.7 million worth of stock at the end of September. It was followed by Nitorum Capital with a $36 million position. Other investors bullish on the company included Polaris Capital Management, Fisher Asset Management, and D E Shaw. In terms of the portfolio weights assigned to each position Blue Grotto Capital allocated the biggest weight to Webster Financial Corporation (NYSE:WBS), around 2.74% of its 13F portfolio. Newtyn Management is also relatively very bullish on the stock, earmarking 2.41 percent of its 13F equity portfolio to WBS.

Seeing as Webster Financial Corporation (NYSE:WBS) has witnessed falling interest from hedge fund managers, we can see that there were a few hedge funds who were dropping their full holdings by the end of the second quarter. Intriguingly, Daniel Johnson’s Gillson Capital sold off the largest position of the 750 funds monitored by Insider Monkey, totaling close to $7.4 million in stock. Greg Eisner’s fund, Engineers Gate Manager, also cut its stock, about $2.4 million worth. These transactions are intriguing to say the least, as total hedge fund interest fell by 3 funds by the end of the second quarter.

Let’s now take a look at hedge fund activity in other stocks similar to Webster Financial Corporation (NYSE:WBS). We will take a look at Pluralsight, Inc. (NASDAQ:PS), Papa John’s International, Inc. (NASDAQ:PZZA), Sanderson Farms, Inc. (NASDAQ:SAFM), Rapid7 Inc (NASDAQ:RPD), Ping Identity Holding Corp. (NYSE:PING), EPR Properties (NYSE:EPR), and Stitch Fix, Inc. (NASDAQ:SFIX). All of these stocks’ market caps match WBS’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
PS 27 233743 9
PZZA 34 404173 5
SAFM 22 205175 5
RPD 14 64535 -2
PING 15 73422 4
EPR 23 328921 0
SFIX 28 219372 12
Average 23.3 218477 4.7

View table here if you experience formatting issues.

As you can see these stocks had an average of 23.3 hedge funds with bullish positions and the average amount invested in these stocks was $218 million. That figure was $246 million in WBS’s case. Papa John’s International, Inc. (NASDAQ:PZZA) is the most popular stock in this table. On the other hand Rapid7 Inc (NASDAQ:RPD) is the least popular one with only 14 bullish hedge fund positions. Webster Financial Corporation (NYSE:WBS) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for WBS is 69.3. 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. This is a slightly positive signal but 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 23.8% in 2020 through September 14th and beat the market by 17.6 percentage points. Unfortunately WBS wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on WBS were disappointed as the stock returned -2% during the same time period 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 many of these stocks already outperformed the market so far this year.

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

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