In this article you are going to find out whether hedge funds think WPP Plc (NYSE:WPP) is a good investment right now. We like to check what the smart money thinks first before doing extensive research on a given stock. Although there have been several high profile failed hedge fund picks, the consensus picks among hedge fund investors have historically outperformed the market after adjusting for known risk attributes. It’s not surprising given that hedge funds have access to better information and more resources to predict the winners in the stock market.
Is WPP Plc (NYSE:WPP) ready to rally soon? The best stock pickers are taking a pessimistic view. The number of long hedge fund bets retreated by 2 recently. Our calculations also showed that WPP 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). WPP was in 5 hedge funds’ portfolios at the end of the first quarter of 2020. There were 7 hedge funds in our database with WPP positions at the end of the previous quarter.
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 101% since March 2017 and outperformed the S&P 500 ETFs by more than 58 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.
Israel Englander of Millennium Management
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. Keeping this in mind we’re going to take a peek at the recent hedge fund action surrounding WPP Plc (NYSE:WPP).
How have hedgies been trading WPP Plc (NYSE:WPP)?
At Q1’s end, a total of 5 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -29% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards WPP over the last 18 quarters. With hedge funds’ capital changing hands, there exists a select group of notable hedge fund managers who were boosting their holdings considerably (or already accumulated large positions).
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Renaissance Technologies, holds the most valuable position in WPP Plc (NYSE:WPP). Renaissance Technologies has a $19.4 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 $5.7 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Remaining professional money managers that are bullish consist of D. E. Shaw’s D E Shaw, John Overdeck and David Siegel’s Two Sigma Advisors and Israel Englander’s Millennium Management. In terms of the portfolio weights assigned to each position Renaissance Technologies allocated the biggest weight to WPP Plc (NYSE:WPP), around 0.02% of its 13F portfolio. Arrowstreet Capital is also relatively very bullish on the stock, dishing out 0.02 percent of its 13F equity portfolio to WPP.
Seeing as WPP Plc (NYSE:WPP) has witnessed falling interest from the aggregate hedge fund industry, it’s easy to see that there was a specific group of funds that slashed their full holdings heading into Q4. It’s worth mentioning that Ken Griffin’s Citadel Investment Group dropped the biggest stake of all the hedgies followed by Insider Monkey, worth an estimated $2.4 million in stock, and Donald Sussman’s Paloma Partners was right behind this move, as the fund said goodbye to about $0.2 million worth. These bearish behaviors are important to note, as total hedge fund interest fell by 2 funds heading into Q4.
Let’s now take a look at hedge fund activity in other stocks similar to WPP Plc (NYSE:WPP). We will take a look at Lyft, Inc. (NASDAQ:LYFT), Packaging Corporation Of America (NYSE:PKG), Graco Inc. (NYSE:GGG), and Carnival Corporation & plc (NYSE:CUK). This group of stocks’ market valuations resemble WPP’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| LYFT | 31 | 389490 | -14 |
| PKG | 23 | 105812 | 5 |
| GGG | 21 | 157995 | 0 |
| CUK | 9 | 41281 | -5 |
| Average | 21 | 173645 | -3.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 21 hedge funds with bullish positions and the average amount invested in these stocks was $174 million. That figure was $29 million in WPP’s case. Lyft, Inc. (NASDAQ:LYFT) is the most popular stock in this table. On the other hand Carnival Corporation & plc (NYSE:CUK) is the least popular one with only 9 bullish hedge fund positions. Compared to these stocks WPP Plc (NYSE:WPP) is even less popular than CUK. Hedge funds dodged a bullet by taking a bearish stance towards WPP. Our calculations showed that the top 10 most popular hedge fund stocks 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 managed to beat the market by 13.2 percentage points. Unfortunately WPP wasn’t nearly as popular as these 10 stocks (hedge fund sentiment was very bearish); WPP investors were disappointed as the stock returned 12.1% during the second quarter (through the end of May) 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 most of these stocks already outperformed the market so far in 2020.
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Disclosure: None. This article was originally published at Insider Monkey.
