In this article you are going to find out whether hedge funds think First Western Financial, Inc. (NASDAQ:MYFW) is a good investment right now. We like to check what the smart money thinks first before doing extensive research on a given stock. Although there have been several high profile failed hedge fund picks, the consensus picks among hedge fund investors have historically outperformed the market after adjusting for known risk attributes. It's not surprising given that hedge funds have access to better information and more resources to predict the winners in the stock market.
Is MYFW a good stock to buy? Hedge fund interest in First Western Financial, Inc. (NASDAQ:MYFW) shares was flat at the end of last quarter. This is usually a negative indicator. Our calculations also showed that MYFW isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings). At the end of this article we will also compare MYFW to other stocks including EMCORE Corporation (NASDAQ:EMKR), Oncolytics Biotech, Inc. (NASDAQ:ONCY), and Natural Resource Partners LP (NYSE:NRP) to get a better sense of its popularity.
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey's monthly stock picks returned 206.8% since March 2017 and outperformed the S&P 500 ETFs by more than 115 percentage points (see the details here). That's why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
Fred Cummings of Elizabeth Park Capital
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, an activist hedge fund wants to buy this $26 biotech stock for $50. So, we recommended a long position to our monthly premium newsletter subscribers. We go through lists like the 10 best battery stocks to pick the next Tesla that will deliver a 10x return. 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 homepage. With all of this in mind let's take a gander at the recent hedge fund action encompassing First Western Financial, Inc. (NASDAQ:MYFW).
Do Hedge Funds Think MYFW Is A Good Stock To Buy Now?
At Q1's end, a total of 3 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 0% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards MYFW over the last 23 quarters. With hedgies' capital changing hands, there exists a few key hedge fund managers who were adding to their stakes considerably (or already accumulated large positions).
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Elizabeth Park Capital Management, managed by Fred Cummings, holds the biggest position in First Western Financial, Inc. (NASDAQ:MYFW). Elizabeth Park Capital Management has a $7.8 million position in the stock, comprising 2.6% of its 13F portfolio. On Elizabeth Park Capital Management's heels is Basswood Capital, managed by Matthew Lindenbaum, which holds a $2.1 million position; the fund has 0.1% of its 13F portfolio invested in the stock. In terms of the portfolio weights assigned to each position Elizabeth Park Capital Management allocated the biggest weight to First Western Financial, Inc. (NASDAQ:MYFW), around 2.6% of its 13F portfolio. Mendon Capital Advisors is also relatively very bullish on the stock, dishing out 0.18 percent of its 13F equity portfolio to MYFW.
We view hedge fund activity in the stock unfavorable, but in this case there was only a single hedge fund selling its entire position: Renaissance Technologies. One hedge fund selling its entire position doesn't always imply a bearish intent. Theoretically a hedge fund may decide to sell a promising position in order to invest the proceeds in a more promising idea. However, we don't think this is the case in this case because only one of the 800+ hedge funds tracked by Insider Monkey identified as a viable investment and initiated a position in the stock (that fund was Basswood Capital).
Let's go over hedge fund activity in other stocks similar to First Western Financial, Inc. (NASDAQ:MYFW). We will take a look at EMCORE Corporation (NASDAQ:EMKR), Oncolytics Biotech, Inc. (NASDAQ:ONCY), Natural Resource Partners LP (NYSE:NRP), Level One Bancorp, Inc. (NASDAQ:LEVL), Gold Resource Corporation (NYSE:GORO), Jowell Global Ltd. (NASDAQ:JWEL), and Community Bankers Trust Corp. (NASDAQ:ESXB). This group of stocks' market valuations are similar to MYFW's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position EMKR,19,62826,4 ONCY,2,542,-1 NRP,1,9040,0 LEVL,3,1160,1 GORO,6,2110,-1 JWEL,1,279,1 ESXB,6,19789,1 Average,5.4,13678,0.7 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 5.4 hedge funds with bullish positions and the average amount invested in these stocks was $14 million. That figure was $10 million in MYFW's case. EMCORE Corporation (NASDAQ:EMKR) is the most popular stock in this table. On the other hand Natural Resource Partners LP (NYSE:NRP) is the least popular one with only 1 bullish hedge fund positions. First Western Financial, Inc. (NASDAQ:MYFW) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for MYFW is 28.6. 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 negative signal and we'd rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 17.2% in 2021 through June 11th and surpassed the market again by 3.3 percentage points. Unfortunately MYFW wasn't nearly as popular as these 5 stocks (hedge fund sentiment was quite bearish); MYFW investors were disappointed as the stock returned 6.4% since the end of March (through 6/11) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2021.
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Disclosure: None. This article was originally published at Insider Monkey.