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 third 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 6 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) shareholders have witnessed a decrease in hedge fund sentiment lately. Wayfair Inc (NYSE:W) was in 31 hedge funds’ portfolios at the end of September. The all time high for this statistic is 41. Our calculations also showed that W isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings).
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium prices have more than doubled over the past year, so we go through lists like the 10 best EV 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. Keeping this in mind we’re going to take a look at the fresh hedge fund action surrounding Wayfair Inc (NYSE:W).
Charles Clough of Clough Capital Partners
Do Hedge Funds Think W Is A Good Stock To Buy Now?
At third quarter’s end, a total of 31 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -11% from the previous quarter. The graph below displays the number of hedge funds with bullish position in W over the last 25 quarters. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Spruce House Investment Management held the most valuable stake in Wayfair Inc (NYSE:W), which was worth $1226.4 million at the end of the third quarter. On the second spot was Bares Capital Management which amassed $695.8 million worth of shares. Whale Rock Capital Management, Citadel Investment Group, and Nantahala Capital Management 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 31.77% of its 13F portfolio. Bares Capital Management is also relatively very bullish on the stock, setting aside 12.48 percent of its 13F equity portfolio to W.
Seeing as Wayfair Inc (NYSE:W) has faced a decline in interest from the aggregate hedge fund industry, it’s easy to see that there exists a select few funds that slashed their full holdings in the third quarter. It’s worth mentioning that Renaissance Technologies cut the biggest investment of the “upper crust” of funds monitored by Insider Monkey, worth about $95.8 million in stock. John Overdeck and David Siegel’s fund, Two Sigma Advisors, also dropped its stock, about $43.2 million worth. These transactions are important to note, as aggregate hedge fund interest dropped by 4 funds in the third quarter.
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Wayfair Inc (NYSE:W) but similarly valued. These stocks are Carnival Corporation & plc (NYSE:CUK), Arista Networks Inc (NYSE:ANET), Etsy Inc (NASDAQ:ETSY), V.F. Corporation (NYSE:VFC), Deutsche Bank Aktiengesellschaft (NYSE:DB), Peloton Interactive, Inc. (NASDAQ:PTON), and Best Buy Co., Inc. (NYSE:BBY). This group of stocks’ market valuations are closest to W’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| CUK | 9 | 239633 | -1 |
| ANET | 32 | 487538 | -3 |
| ETSY | 47 | 1435748 | 0 |
| VFC | 23 | 284894 | -9 |
| DB | 15 | 1795111 | -5 |
| PTON | 62 | 4634220 | -5 |
| BBY | 29 | 679878 | 2 |
| Average | 31 | 1365289 | -3 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 31 hedge funds with bullish positions and the average amount invested in these stocks was $1365 million. That figure was $3246 million in W’s case. Peloton Interactive, Inc. (NASDAQ:PTON) is the most popular stock in this table. On the other hand Carnival Corporation & plc (NYSE:CUK) is the least popular one with only 9 bullish hedge fund positions. Wayfair Inc (NYSE:W) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for W is 44.4. 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 29.6% in 2021 and surpassed the market again by 3.6 percentage points. Unfortunately, W wasn’t nearly as popular as these 5 stocks (hedge fund sentiment was quite bearish); W investors were disappointed as the stock returned -39% since the end of September (through 1/31) 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 all of these stocks already outperformed the market since 2019.
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Disclosure: None. This article was originally published at Insider Monkey.
