We know that hedge funds generate strong, risk-adjusted returns over the long run, which is why imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, professional investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn’t mean that they don’t have occasional colossal losses; they do. However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, let’s examine the smart money sentiment towards WisdomTree Investments, Inc. (NASDAQ:WETF) and determine whether hedge funds skillfully traded this stock.
Is WisdomTree Investments, Inc. (NASDAQ:WETF) ready to rally soon? Investors who are in the know were getting more bullish. The number of long hedge fund positions advanced by 3 lately. Our calculations also showed that WETF 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). WETF was in 20 hedge funds’ portfolios at the end of the first quarter of 2020. There were 17 hedge funds in our database with WETF holdings at the end of the previous quarter.
Video: Watch our video about the top 5 most popular hedge fund stocks.
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 101% since March 2017 and outperformed the S&P 500 ETFs by more than 58 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
Jeffrey Jacobowitz of Simcoe Capital Management
At Insider Monkey we scour multiple sources to uncover the next great investment idea. Hedge fund sentiment towards Tesla reached its all time high at the end of 2019 and Tesla shares more than tripled this year. We are trying to identify other EV revolution winners, so we are checking out this under-the-radar lithium stock. 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. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. Now let’s view the latest hedge fund action surrounding WisdomTree Investments, Inc. (NASDAQ:WETF).
What does smart money think about WisdomTree Investments, Inc. (NASDAQ:WETF)?
At Q1’s end, a total of 20 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 18% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards WETF over the last 18 quarters. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Renaissance Technologies was the largest shareholder of WisdomTree Investments, Inc. (NASDAQ:WETF), with a stake worth $9.2 million reported as of the end of September. Trailing Renaissance Technologies was Simcoe Capital Management, which amassed a stake valued at $8.3 million. Citadel Investment Group, Millennium Management, and Marshall Wace LLP 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 Simcoe Capital Management allocated the biggest weight to WisdomTree Investments, Inc. (NASDAQ:WETF), around 2.55% of its 13F portfolio. BlueMar Capital Management is also relatively very bullish on the stock, earmarking 0.37 percent of its 13F equity portfolio to WETF.
As aggregate interest increased, key hedge funds were breaking ground themselves. Simcoe Capital Management, managed by Jeffrey Jacobowitz, initiated the most outsized position in WisdomTree Investments, Inc. (NASDAQ:WETF). Simcoe Capital Management had $8.3 million invested in the company at the end of the quarter. Paul Marshall and Ian Wace’s Marshall Wace LLP also initiated a $2.3 million position during the quarter. The following funds were also among the new WETF investors: Claes Fornell’s CSat Investment Advisory, Gregg Moskowitz’s Interval Partners, and Greg Eisner’s Engineers Gate Manager.
Let’s now take a look at hedge fund activity in other stocks similar to WisdomTree Investments, Inc. (NASDAQ:WETF). These stocks are Kosmos Energy Ltd (NYSE:KOS), Scholar Rock Holding Corporation (NASDAQ:SRRK), Replimune Group, Inc. (NASDAQ:REPL), and Clearwater Paper Corp (NYSE:CLW). This group of stocks’ market valuations resemble WETF’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| KOS | 21 | 28495 | -9 |
| SRRK | 5 | 40575 | -2 |
| REPL | 8 | 58138 | -1 |
| CLW | 5 | 22727 | -1 |
| Average | 9.75 | 37484 | -3.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 9.75 hedge funds with bullish positions and the average amount invested in these stocks was $37 million. That figure was $38 million in WETF’s case. Kosmos Energy Ltd (NYSE:KOS) is the most popular stock in this table. On the other hand Scholar Rock Holding Corporation (NASDAQ:SRRK) is the least popular one with only 5 bullish hedge fund positions. WisdomTree Investments, Inc. (NASDAQ:WETF) 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 18.6% in 2020 through July 27th but still beat the market by 17.1 percentage points. Hedge funds were also right about betting on WETF as the stock returned 56.1% since Q1 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.
