Is Woodward Inc (NASDAQ:WWD) a good place to invest some of your money right now? We can gain invaluable insight to help us answer that question by studying the investment trends of top investors, who employ world-class Ivy League graduates, who are given immense resources and industry contacts to put their financial expertise to work. The top picks of these firms have historically outperformed the market when we account for known risk factors, making them very valuable investment ideas.
Woodward Inc (NASDAQ:WWD) has experienced a decrease in hedge fund sentiment in recent months. Woodward Inc (NASDAQ:WWD) was in 22 hedge funds’ portfolios at the end of the second quarter of 2021. The all time high for this statistic is 28. Our calculations also showed that WWD isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings).
Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by 79 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 underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.
Boykin Curry of Eagle Capital
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. 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. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our homepage. Now let’s take a look at the fresh hedge fund action surrounding Woodward Inc (NASDAQ:WWD).
Do Hedge Funds Think WWD Is A Good Stock To Buy Now?
Heading into the third quarter of 2021, a total of 22 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -19% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in WWD over the last 24 quarters. With the smart money’s positions undergoing their usual ebb and flow, there exists a few notable hedge fund managers who were upping their holdings substantially (or already accumulated large positions).
Among these funds, 0 held the most valuable stake in Woodward Inc (NASDAQ:WWD), which was worth $253.1 million at the end of the second quarter. On the second spot was Eagle Capital Management which amassed $214.4 million worth of shares. Royce & Associates, Balyasny Asset Management, and Adage 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 Deccan Value Advisors allocated the biggest weight to Woodward Inc (NASDAQ:WWD), around 9.98% of its 13F portfolio. Jade Capital Advisors is also relatively very bullish on the stock, dishing out 2.07 percent of its 13F equity portfolio to WWD.
Due to the fact that Woodward Inc (NASDAQ:WWD) has faced a decline in interest from the entirety of the hedge funds we track, it’s easy to see that there is a sect of money managers who sold off their full holdings last quarter. It’s worth mentioning that Joseph Samuels’s Islet Management sold off the largest stake of all the hedgies monitored by Insider Monkey, valued at close to $9.2 million in stock. Girish Kumar’s fund, TenCore Partners, also sold off its stock, about $7.5 million worth. These bearish behaviors are intriguing to say the least, as total hedge fund interest dropped by 5 funds last quarter.
Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Woodward Inc (NASDAQ:WWD) but similarly valued. These stocks are Globus Medical Inc (NYSE:GMED), Encompass Health Corporation (NYSE:EHC), Brunswick Corporation (NYSE:BC), AngloGold Ashanti Limited (NYSE:AU), Reinsurance Group of America Inc (NYSE:RGA), Skechers USA Inc (NYSE:SKX), and Tempur Sealy International Inc. (NYSE:TPX). This group of stocks’ market caps are similar to WWD’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| GMED | 35 | 309393 | 7 |
| EHC | 42 | 864585 | 6 |
| BC | 38 | 1095771 | -4 |
| AU | 12 | 372898 | -2 |
| RGA | 28 | 414971 | 1 |
| SKX | 35 | 772836 | 6 |
| TPX | 35 | 1096506 | -2 |
| Average | 32.1 | 703851 | 1.7 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 32.1 hedge funds with bullish positions and the average amount invested in these stocks was $704 million. That figure was $683 million in WWD’s case. Encompass Health Corporation (NYSE:EHC) is the most popular stock in this table. On the other hand AngloGold Ashanti Limited (NYSE:AU) is the least popular one with only 12 bullish hedge fund positions. Woodward Inc (NASDAQ:WWD) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for WWD is 40.2. 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 24% in 2021 through October 22nd and surpassed the market again by 1.6 percentage points. Unfortunately WWD wasn’t nearly as popular as these 5 stocks (hedge fund sentiment was quite bearish); WWD investors were disappointed as the stock returned -6.9% since the end of June (through 10/22) 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.
