Investing in hedge funds can bring large profits, but it’s not for everybody, since hedge funds are available only for high-net-worth individuals. They generate significant returns for investors to justify their large fees and they allocate a lot of time and employ a complex analysis to determine the best stocks to invest in. A particularly interesting group of stocks that hedge funds like is the small-caps. The huge amount of capital does not allow hedge funds to invest a lot in small-caps, but our research showed that their most popular small-cap ideas are less efficiently priced and generate stronger returns than their large- and mega-cap picks and the broader market. That is why we follow the hedge fund activity in the small-cap space.
Is World Acceptance Corp. (NASDAQ:WRLD) a marvelous investment right now? The best stock pickers are categorically in a bullish mood. The number of bullish hedge fund bets that are revealed through the 13F filings strengthened by 1 recently. There were 11 hedge funds in our database with WRLD positions at the end of the 2016 third quarter. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as China Distance Education Hldgs Ltd (ADR) (NYSE:DL), Spark Energy Inc (NASDAQ:SPKE), and Donegal Group Inc (NASDAQ:DGICA) to gather more data points.
Follow World Acceptance Corp (NASDAQ:WRLD)
Follow World Acceptance Corp (NASDAQ:WRLD)
We care about hedge fund sentiment because historically hedge funds’ stock picks delivered strong risk adjusted returns. There are certain segments of the market where hedge funds’ stock picks performed much better than its benchmarks. For instance, the 30 most popular mid-cap stocks among the best performing hedge funds returned 18% over the last 12 months outpacing S&P 500 Index by more than 10 percentage points. We developed this strategy 2.5 years ago and started sharing its picks in our quarterly newsletter. It bested the S&P 500 Index ETFs by delivering a solid 39% vs. 22% gain for its benchmarks.
Fer Gregory/Shutterstock.com
With all of this in mind, we’re going to take a look at the recent action encompassing World Acceptance Corp. (NASDAQ:WRLD).
How have hedgies been trading World Acceptance Corp. (NASDAQ:WRLD)?
Heading into the fourth quarter of 2016, a total of 11 of the hedge funds tracked by Insider Monkey held long positions in this stock, up 10% from the second quarter of 2016. The graph below displays the number of hedge funds with bullish position in WRLD over the last 5 quarters. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
When looking at the institutional investors followed by Insider Monkey, Edward Goodnow’s Goodnow Investment Group has the most valuable position in World Acceptance Corp. (NASDAQ:WRLD), worth close to $10.4 million, accounting for 2.5% of its total 13F portfolio. Coming in second is Arrowstreet Capital, led by Peter Rathjens, Bruce Clarke and John Campbell, which holds a $10.2 million position; less than 0.1% of its 13F portfolio is allocated to the stock. Some other hedge funds and institutional investors with similar optimism comprise Renaissance Technologies, one of the largest hedge funds in the world, Israel Englander’s Millennium Management and Cliff Asness’s AQR Capital Management. We should note that none of these hedge funds are among our list of the 100 best performing hedge funds which is based on the performance of their 13F long positions in non-microcap stocks.
As one would reasonably expect, some big names were breaking ground themselves. Israel Englander’s Millennium Management created the most valuable position in World Acceptance Corp. (NASDAQ:WRLD). According to regulatory filings, the fund had $1.9 million invested in the company at the end of the quarter. Michael Platt and William Reeves’s BlueCrest Capital Mgmt. also made a $0.4 million investment in the stock during the quarter. The other funds with new positions in the stock are Ken Griffin’s Citadel Investment Group, Ken Griffin’s Citadel Investment Group, and Gavin Saitowitz and Cisco J. del Valle’s Springbok Capital.
Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as World Acceptance Corp. (NASDAQ:WRLD) but similarly valued. These stocks are China Distance Education Hldgs Ltd (ADR) (NYSE:DL), Spark Energy Inc (NASDAQ:SPKE), Donegal Group Inc (NASDAQ:DGICA), and Casella Waste Systems Inc. (NASDAQ:CWST). This group of stocks’ market caps resemble WRLD’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| DL | 5 | 10437 | 1 |
| SPKE | 9 | 11785 | 0 |
| DGICA | 3 | 5512 | -1 |
| CWST | 18 | 101181 | 3 |
As you can see these stocks had an average of 9 hedge funds with bullish positions and the average amount invested in these stocks was $32 million. That figure was $29 million in WRLD’s case. Casella Waste Systems Inc. (NASDAQ:CWST) is the most popular stock in this table. On the other hand Donegal Group Inc (NASDAQ:DGICA) is the least popular one with only 3 bullish hedge fund positions. World Acceptance Corp. (NASDAQ:WRLD) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. In this regard CWST might be a better candidate to consider taking a long position in.
Disclosure: none.
