Our extensive research has shown that imitating the smart money can generate significant returns for retail investors, which is why we track nearly 900 active prominent money managers and analyze their quarterly 13F filings. The stocks that are heavily bought by hedge funds historically outperformed the market, though there is no shortage of high profile failures like hedge funds’ 2018 losses in Facebook and Apple. Let’s take a closer look at what the funds we track think about WPP Plc (NYSE:WPP) in this article.
WPP Plc (NYSE:WPP) has seen a decrease in enthusiasm from smart money of late. WPP Plc (NYSE:WPP) was in 5 hedge funds’ portfolios at the end of March. The all time high for this statistic is 11. Our calculations also showed that WPP isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings).
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 206.8% since March 2017 and outperformed the S&P 500 ETFs by more than 115 percentage points (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
Peter Rathjens of Arrowstreet Capital
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, an activist hedge fund owns nearly 40% of this $23 biotech stock and is trying to buy the rest for around $50. So, we recommended a long position to our monthly premium newsletter subscribers. We go through lists like the 10 best battery 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. Keeping this in mind we’re going to take a look at the recent hedge fund action encompassing WPP Plc (NYSE:WPP).
Do Hedge Funds Think WPP Is A Good Stock To Buy Now?
At Q1’s end, a total of 5 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -17% from the fourth quarter of 2020. By comparison, 5 hedge funds held shares or bullish call options in WPP a year ago. With hedgies’ capital changing hands, there exists an “upper tier” of notable hedge fund managers who were adding to their holdings considerably (or already accumulated large positions).
Among these funds, Arrowstreet Capital held the most valuable stake in WPP Plc (NYSE:WPP), which was worth $21 million at the end of the fourth quarter. On the second spot was D E Shaw which amassed $8.3 million worth of shares. Citadel Investment Group, Renaissance Technologies, and Two Sigma Advisors 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 0 allocated the biggest weight to WPP Plc (NYSE:WPP), around 0.03% of its 13F portfolio. 0 is also relatively very bullish on the stock, dishing out 0.01 percent of its 13F equity portfolio to WPP.
We view hedge fund activity in the stock unfavorable, but in this case there was only a single hedge fund selling its entire position: Balyasny Asset Management. One hedge fund selling its entire position doesn’t always imply a bearish intent. Theoretically a hedge fund may decide to sell a promising position in order to invest the proceeds in a more promising idea. However, we don’t think this is the case in this case because none of the 750+ hedge funds tracked by Insider Monkey identified WPP as a viable investment and initiated a position in the stock.
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as WPP Plc (NYSE:WPP) but similarly valued. These stocks are Grifols SA (NASDAQ:GRFS), Arch Capital Group Ltd. (NASDAQ:ACGL), Avangrid, Inc. (NYSE:AGR), Masco Corporation (NYSE:MAS), Altice USA, Inc. (NYSE:ATUS), Guardant Health, Inc. (NASDAQ:GH), and American Airlines Group Inc (NASDAQ:AAL). This group of stocks’ market values resemble WPP’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| GRFS | 12 | 321129 | -5 |
| ACGL | 34 | 1671185 | 0 |
| AGR | 15 | 58976 | 5 |
| MAS | 33 | 686447 | -7 |
| ATUS | 48 | 3599095 | -8 |
| GH | 41 | 1747051 | -11 |
| AAL | 32 | 561701 | -5 |
| Average | 30.7 | 1235083 | -4.4 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 30.7 hedge funds with bullish positions and the average amount invested in these stocks was $1235 million. That figure was $34 million in WPP’s case. Altice USA, Inc. (NYSE:ATUS) is the most popular stock in this table. On the other hand Grifols SA (NASDAQ:GRFS) is the least popular one with only 12 bullish hedge fund positions. Compared to these stocks WPP Plc (NYSE:WPP) is even less popular than GRFS. Our overall hedge fund sentiment score for WPP is 17.6. 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. 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 17.4% in 2021 through June 18th but managed to beat the market by 6.1 percentage points. A small number of hedge funds were also right about betting on WPP, though not to the same extent, as the stock returned 7.1% since the end of March (through June 18th) and outperformed the market as well.
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Disclosure: None. This article was originally published at Insider Monkey.
