Do Hedge Funds Like Music Group Corp. (WMG)?

The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We at Insider Monkey have plowed through 867 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds’ and investors’ portfolio positions as of September 30th. In this article we look at what those investors think of Warner Music Group Corp. (NASDAQ:WMG).

Warner Music Group Corp. (NASDAQ:WMG) has experienced a decrease in hedge fund sentiment in recent months. Warner Music Group Corp. (NASDAQ:WMG) was in 28 hedge funds’ portfolios at the end of the third quarter of 2021. The all time high for this statistic is 31. Our calculations also showed that WMG 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. Now let’s take a look at the fresh hedge fund action surrounding Warner Music Group Corp. (NASDAQ:WMG).

Gil Simon of SoMa Equity Partners

Do Hedge Funds Think WMG Is A Good Stock To Buy Now?

Heading into the fourth quarter of 2021, a total of 28 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -3% from the previous quarter. By comparison, 20 hedge funds held shares or bullish call options in WMG a year ago. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

More specifically, Darsana Capital Partners was the largest shareholder of Warner Music Group Corp. (NASDAQ:WMG), with a stake worth $179.8 million reported as of the end of September. Trailing Darsana Capital Partners was SoMa Equity Partners, which amassed a stake valued at $175.2 million. Melvin Capital Management, Slate Path Capital, and Shannon River Fund 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 Marlowe Partners allocated the biggest weight to Warner Music Group Corp. (NASDAQ:WMG), around 14.83% of its 13F portfolio. Slate Path Capital is also relatively very bullish on the stock, dishing out 6.11 percent of its 13F equity portfolio to WMG.

Since Warner Music Group Corp. (NASDAQ:WMG) has witnessed bearish sentiment from hedge fund managers, it’s easy to see that there were a few hedge funds that slashed their positions entirely in the third quarter. Interestingly, Jimmy Levin’s Sculptor Capital dumped the biggest investment of the “upper crust” of funds followed by Insider Monkey, totaling close to $116.7 million in stock. David Fiszel’s fund, Honeycomb Asset Management, also cut its stock, about $22.2 million worth. These bearish behaviors are interesting, as aggregate hedge fund interest dropped by 1 funds in the third quarter.

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Warner Music Group Corp. (NASDAQ:WMG) but similarly valued. These stocks are Waters Corporation (NYSE:WAT), PerkinElmer, Inc. (NYSE:PKI), International Paper Company (NYSE:IP), Kellogg Company (NYSE:K), KE Holdings Inc (NYSE:BEKE), Ventas, Inc. (NYSE:VTR), and McCormick & Company, Incorporated (NYSE:MKC). This group of stocks’ market caps resemble WMG’s market cap.

View table here if you experience formatting issues.

As you can see these stocks had an average of 29.6 hedge funds with bullish positions and the average amount invested in these stocks was $1305 million. That figure was $973 million in WMG’s case. Waters Corporation (NYSE:WAT) is the most popular stock in this table. On the other hand Kellogg Company (NYSE:K) is the least popular one with only 22 bullish hedge fund positions. Warner Music Group Corp. (NASDAQ:WMG) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for WMG is 47.8. 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 31.1% in 2021 through December 9th and surpassed the market again by 5.1 percentage points. Unfortunately WMG wasn’t nearly as popular as these 5 stocks (hedge fund sentiment was quite bearish); WMG investors were disappointed as the stock returned -3.5% since the end of September (through 12/9) 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.