Hedge Fund Sentiment Is Stagnant On Winmark Corporation (WINA)

With the second-quarter round of 13F filings behind us it is time to take a look at the stocks in which some of the best money managers in the world preferred to invest or sell heading into the third quarter of 2021. One of these stocks was Winmark Corporation (NASDAQ:WINA).

Winmark Corporation (NASDAQ:WINA) shares haven’t seen a lot of action during the second quarter. Overall, hedge fund sentiment was unchanged. The stock was in 10 hedge funds’ portfolios at the end of June. Our calculations also showed that WINA isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings). At the end of this article we will also compare WINA to other stocks including Global Ship Lease, Inc. (NYSE:GSL), SP Plus Corp (NASDAQ:SP), and AnaptysBio, Inc. (NASDAQ:ANAB) to get a better sense of its popularity.

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.

J. Carlo Cannell of Cannell Capital

Now we’re going to review the latest hedge fund action encompassing Winmark Corporation (NASDAQ:WINA).

Do Hedge Funds Think WINA Is A Good Stock To Buy Now?

At second quarter’s end, a total of 10 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 0% from the previous quarter. The graph below displays the number of hedge funds with bullish position in WINA over the last 24 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 Winmark Corporation (NASDAQ:WINA) was held by Nine Ten Partners, which reported holding $36.7 million worth of stock at the end of June. It was followed by Renaissance Technologies with a $32.6 million position. Other investors bullish on the company included Arrowstreet Capital, Citadel Investment Group, and AltraVue Capital. In terms of the portfolio weights assigned to each position Nine Ten Partners allocated the biggest weight to Winmark Corporation (NASDAQ:WINA), around 3.94% of its 13F portfolio. AltraVue Capital is also relatively very bullish on the stock, earmarking 1.41 percent of its 13F equity portfolio to WINA.

Due to the fact that Winmark Corporation (NASDAQ:WINA) has faced bearish sentiment from the smart money, we can see that there is a sect of funds who sold off their full holdings heading into Q3. Interestingly, Peter Muller’s PDT Partners cut the largest investment of all the hedgies tracked by Insider Monkey, worth about $0.5 million in stock, and D. E. Shaw’s D E Shaw was right behind this move, as the fund cut about $0.5 million worth. These bearish behaviors are interesting, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).

Let’s now review hedge fund activity in other stocks similar to Winmark Corporation (NASDAQ:WINA). These stocks are Global Ship Lease, Inc. (NYSE:GSL), SP Plus Corp (NASDAQ:SP), AnaptysBio, Inc. (NASDAQ:ANAB), CrossFirst Bankshares, Inc. (NASDAQ:CFB), Crinetics Pharmaceuticals, Inc. (NASDAQ:CRNX), CURO Group Holdings Corp. (NYSE:CURO), and Tutor Perini Corp (NYSE:TPC). This group of stocks’ market values are closest to WINA’s market value.

View table here if you experience formatting issues.

As you can see these stocks had an average of 15.6 hedge funds with bullish positions and the average amount invested in these stocks was $142 million. That figure was $87 million in WINA’s case. AnaptysBio, Inc. (NASDAQ:ANAB) is the most popular stock in this table. On the other hand CrossFirst Bankshares, Inc. (NASDAQ:CFB) is the least popular one with only 8 bullish hedge fund positions. Winmark Corporation (NASDAQ:WINA) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for WINA is 36.4. 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 25.7% in 2021 through September 27th and still beat the market by 6.2 percentage points. A small number of hedge funds were also right about betting on WINA as the stock returned 16.6% since the end of the second quarter (through 9/27) and outperformed the market by an even larger margin.

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Disclosure: None. This article was originally published at Insider Monkey.