In this article we will check out the progression of hedge fund sentiment towards Willis Lease Finance Corporation (NASDAQ:WLFC) and determine whether it is a good investment right now. We at Insider Monkey like to examine what billionaires and hedge funds think of a company before spending days of research on it. Given their 2 and 20 payment structure, hedge funds have more incentives and resources than the average investor. The funds have access to expert networks and get tips from industry insiders. They also employ numerous Ivy League graduates and MBAs. Like everyone else, hedge funds perform miserably at times, but their consensus picks have historically outperformed the market after risk adjustments.
Willis Lease Finance Corporation (NASDAQ:WLFC) has seen a decrease in activity from the world’s largest hedge funds recently. WLFC was in 4 hedge funds’ portfolios at the end of the first quarter of 2020. There were 8 hedge funds in our database with WLFC positions at the end of the previous quarter. Our calculations also showed that WLFC 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.
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 87% since March 2017 and outperformed the S&P 500 ETFs by more than 51 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.
Paul Marshall of Marshall Wace
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, 2020’s unprecedented market conditions provide us with the highest number of trading opportunities in a decade. So we are checking out stocks recommended/scorned by legendary Bill Miller. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind let’s view the latest hedge fund action encompassing Willis Lease Finance Corporation (NASDAQ:WLFC).
How have hedgies been trading Willis Lease Finance Corporation (NASDAQ:WLFC)?
At the end of the first quarter, a total of 4 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -50% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in WLFC over the last 18 quarters. With hedgies’ sentiment swirling, there exists an “upper tier” of key hedge fund managers who were increasing their holdings significantly (or already accumulated large positions).
When looking at the institutional investors followed by Insider Monkey, Renaissance Technologies, holds the number one position in Willis Lease Finance Corporation (NASDAQ:WLFC). Renaissance Technologies has a $11.9 million position in the stock, comprising less than 0.1%% of its 13F portfolio. On Renaissance Technologies’s heels is Arrowstreet Capital, led by Peter Rathjens, Bruce Clarke and John Campbell, holding a $0.4 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Other members of the smart money that hold long positions contain Paul Marshall and Ian Wace’s Marshall Wace LLP, Chuck Royce’s Royce & Associates and . In terms of the portfolio weights assigned to each position Renaissance Technologies allocated the biggest weight to Willis Lease Finance Corporation (NASDAQ:WLFC), around 0.01% of its 13F portfolio. Arrowstreet Capital is also relatively very bullish on the stock, setting aside 0.0012 percent of its 13F equity portfolio to WLFC.
Since Willis Lease Finance Corporation (NASDAQ:WLFC) has faced falling interest from the aggregate hedge fund industry, we can see that there were a few fund managers who sold off their positions entirely by the end of the third quarter. Interestingly, Israel Englander’s Millennium Management dumped the biggest stake of all the hedgies tracked by Insider Monkey, valued at an estimated $0.4 million in stock, and Louis Navellier’s Navellier & Associates was right behind this move, as the fund said goodbye to about $0.3 million worth. These moves are important to note, as aggregate hedge fund interest fell by 4 funds by the end of the third quarter.
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Willis Lease Finance Corporation (NASDAQ:WLFC) but similarly valued. These stocks are Codorus Valley Bancorp, Inc. (NASDAQ:CVLY), Auburn National Bancorporation, Inc. (NASDAQ:AUBN), Natural Resource Partners LP (NYSE:NRP), and Avenue Therapeutics, Inc. (NASDAQ:ATXI). This group of stocks’ market values are similar to WLFC’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| CVLY | 4 | 9861 | -1 |
| AUBN | 1 | 266 | -1 |
| NRP | 4 | 7619 | 1 |
| ATXI | 3 | 10481 | 0 |
| Average | 3 | 7057 | -0.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 3 hedge funds with bullish positions and the average amount invested in these stocks was $7 million. That figure was $12 million in WLFC’s case. Codorus Valley Bancorp, Inc. (NASDAQ:CVLY) is the most popular stock in this table. On the other hand Auburn National Bancorporation, Inc. (NASDAQ:AUBN) is the least popular one with only 1 bullish hedge fund positions. Willis Lease Finance Corporation (NASDAQ:WLFC) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. 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 8.3% in 2020 through the end of May but beat the market by 13.2 percentage points. Unfortunately WLFC wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on WLFC were disappointed as the stock returned -20.8% during the same time period and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.
Follow Willis Lease Finance Corp (NASDAQ:WLFC)
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Disclosure: None. This article was originally published at Insider Monkey.
