Coronavirus is probably the #1 concern in investors’ minds right now. It should be. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW. We predicted that a US recession is imminent and US stocks will go down by at least 20% in the next 3-6 months. We also told you to short the market ETFs and buy long-term bonds. Investors who agreed with us and replicated these trades are up double digits whereas the market is down double digits. Our article also called for a total international travel ban to prevent the spread of the coronavirus especially from Europe. We were one step ahead of the markets and the president (see why hell is coming).
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. We know that hedge funds generate strong, risk-adjusted returns over the long run, therefore imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, smart money 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 (like Peltz’s recent General Electric losses). However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, as the current round of 13F filings has just ended, let’s examine the smart money sentiment towards WillScot Corporation (NASDAQ:WSC).
Is WillScot Corporation (NASDAQ:WSC) going to take off soon? The smart money is buying. The number of long hedge fund positions went up by 4 lately. Our calculations also showed that WSC isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of this article for Q3 rankings). WSC was in 28 hedge funds’ portfolios at the end of December. There were 24 hedge funds in our database with WSC holdings at the end of the previous quarter.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by more than 41 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’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 35.3% through March 3rd. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Louis Bacon Moore of Moore Capital
We leave no stone unturned when looking for the next great investment idea. For example, we believe electric vehicles and energy storage are set to become giant markets, and we want to take advantage of the declining lithium prices amid the COVID-19 pandemic. So we are checking out investment opportunities like this one. 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 S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind we’re going to analyze the fresh hedge fund action regarding WillScot Corporation (NASDAQ:WSC).
How have hedgies been trading WillScot Corporation (NASDAQ:WSC)?
At Q4’s end, a total of 28 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 17% from the third quarter of 2019. The graph below displays the number of hedge funds with bullish position in WSC over the last 18 quarters. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in WillScot Corporation (NASDAQ:WSC) was held by Rubric Capital Management, which reported holding $49.5 million worth of stock at the end of September. It was followed by Bayberry Capital Partners with a $38.8 million position. Other investors bullish on the company included Broad Bay Capital, Chescapmanager LLC, and Dendur Capital. In terms of the portfolio weights assigned to each position Bayberry Capital Partners allocated the biggest weight to WillScot Corporation (NASDAQ:WSC), around 17.98% of its 13F portfolio. Lonestar Capital Management is also relatively very bullish on the stock, earmarking 9.45 percent of its 13F equity portfolio to WSC.
As industrywide interest jumped, specific money managers were leading the bulls’ herd. Bayberry Capital Partners, managed by Angela Aldrich, established the most outsized position in WillScot Corporation (NASDAQ:WSC). Bayberry Capital Partners had $38.8 million invested in the company at the end of the quarter. Malcolm Levine’s Dendur Capital also made a $26.9 million investment in the stock during the quarter. The following funds were also among the new WSC investors: Peter S. Park’s Park West Asset Management, Joseph Samuels’s Islet Management, and Mika Toikka’s AlphaCrest Capital Management.
Let’s also examine hedge fund activity in other stocks similar to WillScot Corporation (NASDAQ:WSC). We will take a look at Asbury Automotive Group, Inc. (NYSE:ABG), Canada Goose Holdings Inc. (NYSE:GOOS), Arcosa, Inc. (NYSE:ACA), and Gray Television, Inc. (NYSE:GTN). This group of stocks’ market valuations are similar to WSC’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| ABG | 24 | 362588 | 2 |
| GOOS | 20 | 378578 | 5 |
| ACA | 20 | 247153 | -8 |
| GTN | 24 | 252616 | 0 |
| Average | 22 | 310234 | -0.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 22 hedge funds with bullish positions and the average amount invested in these stocks was $310 million. That figure was $337 million in WSC’s case. Asbury Automotive Group, Inc. (NYSE:ABG) is the most popular stock in this table. On the other hand Canada Goose Holdings Inc. (NYSE:GOOS) is the least popular one with only 20 bullish hedge fund positions. Compared to these stocks WillScot Corporation (NASDAQ:WSC) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks lost 13.0% in 2020 through April 6th and still beat the market by 4.2 percentage points. Unfortunately WSC wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on WSC were disappointed as the stock returned -50.8% during the three months of 2020 (through April 6th) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.
