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 first 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 4.5 years and analyze what the smart money thinks of Wayfair Inc (NYSE:W) based on that data and determine whether they were really smart about the stock.
Wayfair Inc (NYSE:W) has seen an increase in enthusiasm from smart money in recent months. W was in 34 hedge funds’ portfolios at the end of the first quarter of 2020. There were 33 hedge funds in our database with W holdings at the end of the previous quarter. Our calculations also showed that W 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).
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 scour multiple sources to uncover the next great investment idea. There is a lot of volatility in the markets and this presents amazing investment opportunities from time to time. For example, this trader claims to deliver juiced up returns with one trade a week, so we are checking out his highest conviction idea. A second trader claims to score lucrative profits by utilizing a “weekend trading strategy”, so we look into his strategy’s picks. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We recently recommended several stocks partly inspired by legendary Bill Miller’s investor letter. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 in February after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind we’re going to take a gander at the new hedge fund action encompassing Wayfair Inc (NYSE:W).
How are hedge funds trading Wayfair Inc (NYSE:W)?
At Q1’s end, a total of 34 of the hedge funds tracked by Insider Monkey were long this stock, a change of 3% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards W over the last 18 quarters. With hedgies’ sentiment swirling, there exists a few noteworthy hedge fund managers who were increasing their holdings considerably (or already accumulated large positions).
More specifically, Spruce House Investment Management was the largest shareholder of Wayfair Inc (NYSE:W), with a stake worth $387.4 million reported as of the end of September. Trailing Spruce House Investment Management was Bares Capital Management, which amassed a stake valued at $254.3 million. Nantahala Capital Management, Whale Rock Capital Management, and Light Street Capital 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 Spruce House Investment Management allocated the biggest weight to Wayfair Inc (NYSE:W), around 24.46% of its 13F portfolio. Bares Capital Management is also relatively very bullish on the stock, designating 9.17 percent of its 13F equity portfolio to W.
With a general bullishness amongst the heavyweights, key money managers have jumped into Wayfair Inc (NYSE:W) headfirst. Light Street Capital, managed by Glen Kacher, initiated the most valuable position in Wayfair Inc (NYSE:W). Light Street Capital had $61.8 million invested in the company at the end of the quarter. Chen Tianqiao’s Shanda Asset Management also initiated a $16 million position during the quarter. The other funds with brand new W positions are Allan Mecham’s Arlington Value Capital, David Greenspan’s Slate Path Capital, and Lee Ainslie’s Maverick Capital.
Let’s also examine hedge fund activity in other stocks similar to Wayfair Inc (NYSE:W). These stocks are Repligen Corporation (NASDAQ:RGEN), Haemonetics Corporation (NYSE:HAE), RealPage, Inc. (NASDAQ:RP), and Kinross Gold Corporation (NYSE:KGC). This group of stocks’ market values are closest to W’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| RGEN | 21 | 321987 | -2 |
| HAE | 34 | 710291 | 1 |
| RP | 29 | 603843 | -7 |
| KGC | 28 | 447018 | 3 |
| Average | 28 | 520785 | -1.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 28 hedge funds with bullish positions and the average amount invested in these stocks was $521 million. That figure was $1043 million in W’s case. Haemonetics Corporation (NYSE:HAE) is the most popular stock in this table. On the other hand Repligen Corporation (NASDAQ:RGEN) is the least popular one with only 21 bullish hedge fund positions. Wayfair Inc (NYSE:W) is not the most popular stock in this group but hedge fund interest is still above average. 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 12.3% in 2020 through June 30th but still beat the market by 15.5 percentage points. Hedge funds were also right about betting on W as the stock returned 269.8% in Q2 and outperformed the market. Hedge funds were rewarded for their relative bullishness.
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Disclosure: None. This article was originally published at Insider Monkey.
