Rishi Bajaj (pictured), Toby Symonds, and Steve Tesoriere’s Altai Capital has disposed off some 41,100 shares of Wausau Paper Corp. (NYSE:WPP) according to a recent 13D form filed with the SEC. The current stake amounts to over 2.5 million shares valued at $23.13 million and amasses about 5.0% of the company’s outstanding common stock. The latest move comes on the heels of an addition of 42,000 shares to the holding during the first quarter. Wausau Paper Corp. (NYSE:WPP)’s shares have slumped by more than 18% year-to-date and the stock is trading about 20% lower than its 52-week high. In comparison the Paper & Paper Products industry has appreciated by 2.35% during the same period. Currently the stock is trading at a particularly high and unattractive forward earnings multiple of 40.09. In its financial results for the first quarter, Wausau Paper Corp. (NYSE:WPP) beat estimates for both its top and bottom lines.
Hedgies have been losing interest in the company lately, perhaps owing to its worsening fundamentals. Among the funds that we track, a total of 10 firms had an aggregate investment of $164.66 million in the company compared to 13 funds with $190.39 million at the end of the previous quarter. Given that the stock lost more than 16% of its value in the first quarter, that accounts for the dip in overall value of hedge funds’ holdings, however over 20% of the funds who formerly held positions selling out of the stock is nonetheless a red flag.
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An everyday investor does not have the time or the required skill-set to carry out an in-depth analysis of equities and identify companies with the best future prospects like a fund with the knowledge and resources of Visium can. However, it is also not a good idea to pay the egregiously high fees that investment firms charge for their stock picking expertise. Thus a retail investor is better off to monkey the most popular stock picks among hedge funds by him or herself. But not just any picks mind you. Our research has shown that a portfolio based on hedge funds’ top stock picks (which are invariably comprised entirely of large-cap companies) falls considerably short of a portfolio based on their best small-cap stock picks. The most popular large-cap stocks among hedge funds underperformed the market by an average of seven basis points per month in our back tests whereas the 15 most popular small-cap stock picks among hedge funds outperformed the market by nearly a percentage point per month over the same period between 1999 and 2012. Since officially launching our small-cap strategy in August 2012 it has performed just as predicted, beating the market by over 80 percentage points and returning over 135%, while hedge funds themselves have collectively underperformed the market (read the details here).
We also track insider activity since it gives valuable insight into how the company’s management sees its future prospects, especially insider purchases, which send a rather clear bullish signal. However in the case of Wausau Paper Corp. (NYSE:WPP) no such activity has taken place this year.
What does the smart money think about Wausau Paper Corp. (NYSE:WPP)?
Heading into the second trimester, a total of ten hedge funds tracked by Insider Monkey held long positions in this stock, a drop of 23% from one quarter earlier. With the smart money’s capital changing hands, there exists an “upper tier” of notable hedge fund managers who were boosting their holdings substantially.
Of the funds tracked by Insider Monkey, Jeffrey Smith‘s Starboard Value LP had the largest position in Wausau Paper Corp. (NYSE:WPP), worth close to $71.5 million, amounting to 1.5% of its total 13F portfolio. The second-most bullish hedge fund manager is LionEye Capital Management, led by Stephen V. Raneri, holding a $36.8 million position; 1.5% of its 13F portfolio is allocated to the company. Some other hedge funds that hold long positions encompass Phill Gross and Robert Atchinson’s Adage Capital Management and Stephen Loukas, David A. Lorber, and Zachary George’s FrontFour Capital Group.
Since Wausau Paper Corp. (NYSE:WPP) has witnessed a declination in interest from the entirety of the hedge funds we track, we can see that there was a specific group of hedgies that elected to cut their positions entirely last quarter. At the top of the heap, Israel Englander’s Millennium Management dumped the biggest position of the 700 funds watched by Insider Monkey, worth $695,000 in stock. Ken Gray and Steve Walsh’s fund, Bryn Mawr Capital, also cut its stake, worth $310,000 worth. These transactions are important to note, as aggregate hedge fund interest fell by three funds last quarter.
Given the weak growth figures of the paper industry, a high valuation of the company in terms of earnings multiple, and dwindling hedge fund interest, Wausau Paper Corp. (NYSE:WPP) is not a buy at the current price level.
Disclosure: None
