While the market driven by short-term sentiment influenced by the accomodative interest rate environment in the US, increasing oil prices and deteriorating expectations towards the resolution of the trade war with China, many smart money investors kept their cautious approach regarding the current bull run in the third quarter and hedging or reducing many of their long positions. Some fund managers are betting on Dow hitting 40,000 to generate strong returns. However, as we know, big investors usually buy stocks with strong fundamentals that can deliver gains both in bull and bear markets, which is why we believe we can profit from imitating them. In this article, we are going to take a look at the smart money sentiment surrounding World Wrestling Entertainment, Inc. (NYSE:WWE) and see how the stock performed in comparison to hedge funds’ consensus picks.
World Wrestling Entertainment, Inc. (NYSE:WWE) shareholders have witnessed a decrease in hedge fund sentiment of late. Our calculations also showed that WWE isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video at the end of this article for Q2 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 flagship best performing hedge funds strategy returned 91% since May 2014 and outperformed the Russell 2000 ETFs by nearly 40 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.
Stephen Mandel of Lone Pine Capital
We leave no stone unturned when looking for the next great investment idea. For example Discover is offering this insane cashback card, so we look into shorting the stock. One of the most bullish analysts in America just put his money where his mouth is. He says, “I’m investing more today than I did back in early 2009.” So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We even check out this option genius’ weekly trade ideas. This December, we recommended Adams Energy as a one-way bet based on an under-the-radar fund manager’s investor letter and the stock already gained 20 percent. With all of this in mind we’re going to take a gander at the key hedge fund action surrounding World Wrestling Entertainment, Inc. (NYSE:WWE).
What have hedge funds been doing with World Wrestling Entertainment, Inc. (NYSE:WWE)?
Heading into the fourth quarter of 2019, a total of 34 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -13% from one quarter earlier. On the other hand, there were a total of 24 hedge funds with a bullish position in WWE a year ago. With hedge funds’ positions undergoing their usual ebb and flow, there exists a few notable hedge fund managers who were increasing their stakes substantially (or already accumulated large positions).
More specifically, Lone Pine Capital was the largest shareholder of World Wrestling Entertainment, Inc. (NYSE:WWE), with a stake worth $210.5 million reported as of the end of September. Trailing Lone Pine Capital was Sachem Head Capital, which amassed a stake valued at $145.9 million. Renaissance Technologies, Citadel Investment Group, and SRS Investment 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 Sachem Head Capital allocated the biggest weight to World Wrestling Entertainment, Inc. (NYSE:WWE), around 11.42% of its 13F portfolio. Newbrook Capital Advisors is also relatively very bullish on the stock, designating 6.66 percent of its 13F equity portfolio to WWE.
Due to the fact that World Wrestling Entertainment, Inc. (NYSE:WWE) has faced a decline in interest from the aggregate hedge fund industry, we can see that there was a specific group of hedgies who were dropping their full holdings in the third quarter. At the top of the heap, Gabriel Plotkin’s Melvin Capital Management said goodbye to the largest investment of the 750 funds monitored by Insider Monkey, valued at an estimated $50.5 million in stock. John Lykouretzos’s fund, Hoplite Capital Management, also said goodbye to its stock, about $33.6 million worth. These moves are intriguing to say the least, as total hedge fund interest fell by 5 funds in the third quarter.
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as World Wrestling Entertainment, Inc. (NYSE:WWE) but similarly valued. We will take a look at The Howard Hughes Corporation (NYSE:HHC), IAA, Inc. (NYSE:IAA), KT Corporation (NYSE:KT), and Cullen/Frost Bankers, Inc. (NYSE:CFR). This group of stocks’ market valuations are closest to WWE’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| HHC | 25 | 527177 | -1 |
| IAA | 31 | 758086 | -11 |
| KT | 18 | 267914 | -1 |
| CFR | 20 | 116202 | 2 |
| Average | 23.5 | 417345 | -2.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 23.5 hedge funds with bullish positions and the average amount invested in these stocks was $417 million. That figure was $1204 million in WWE’s case. IAA, Inc. (NYSE:IAA) is the most popular stock in this table. On the other hand KT Corporation (NYSE:KT) is the least popular one with only 18 bullish hedge fund positions. Compared to these stocks World Wrestling Entertainment, Inc. (NYSE:WWE) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.1% in 2019 through December 23rd and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. Unfortunately WWE wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on WWE were disappointed as the stock returned -12.2% so far in 2019 (through 12/23) and trailed 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 65 percent of these stocks already outperformed the market in 2019.
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.
