At Insider Monkey we track the activity of some of the best-performing hedge funds like Appaloosa Management, Baupost, and Third Point because we determined that some of the stocks that they are collectively bullish on can help us generate returns above the broader indices. Out of thousands of stocks that hedge funds invest in, small-caps can provide the best returns over the long term due to the fact that these companies are less efficiently priced and are usually under the radars of mass-media, analysts and dumb money. This is why we follow the smart money moves in the small-cap space.
Wayfair Inc (NYSE:W) was in 29 hedge funds’ portfolios at the end of September. W has seen an increase in enthusiasm from smart money recently. There were 23 hedge funds in our database with W positions at the end of the previous quarter. At the end of this article we will also compare W to other stocks including Hill-Rom Holdings, Inc. (NYSE:HRC), Aspen Technology, Inc. (NASDAQ:AZPN), and Cypress Semiconductor Corporation (NASDAQ:CY) to get a better sense of its popularity.
Follow Wayfair Inc. (NYSE:W)
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At Insider Monkey, we’ve developed an investment strategy that has delivered market-beating returns over the past 12 months. Our strategy identifies the 100 best-performing funds of the previous quarter from among the collection of 700+ successful funds that we track in our database, which we accomplish using our returns methodology. We then study the portfolios of those 100 funds using the latest 13F data to uncover the 30 most popular mid-cap stocks (market caps of between $1 billion and $10 billion) among them to hold until the next filing period. This strategy delivered 18% gains over the past 12 months, more than doubling the 8% returns enjoyed by the S&P 500 ETFs.
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What have hedge funds been doing with Wayfair Inc (NYSE:W)?
Heading into the fourth quarter of 2016, a total of 29 of the hedge funds tracked by Insider Monkey were long this stock, an increase of 26% from one quarter earlier. With the smart money’s positions undergoing their usual ebb and flow, there exists a few key hedge fund managers who were boosting their stakes significantly (or already accumulated large positions).
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Richard Chilton’s Chilton Investment Company has the largest position in Wayfair Inc (NYSE:W), worth close to $54.7 million, amounting to 2.1% of its total 13F portfolio. The second largest stake is held by Robert Pitts of Steadfast Capital Management, with a $39.1 million position. Remaining hedge funds and institutional investors that hold long positions comprise Philippe Laffont’s Coatue Management, Matthew A. Weatherbie’s Weatherbie Capital and Ricky Sandler’s Eminence Capital.
With a general bullishness amongst the heavyweights, key hedge funds were leading the bulls’ herd. EastBay Asset Management, managed by Adam Wolfberg and Steven Landry, initiated the biggest position in Wayfair Inc (NYSE:W). EastBay Asset Management had $19.1 million invested in the company at the end of the quarter. Dmitry Balyasny’s Balyasny Asset Management also made a $15.3 million investment in the stock during the quarter. The other funds with new positions in the stock are Ryan Frick and Oliver Evans’ Dorsal Capital Management, Paul Tudor Jones’s Tudor Investment Corp, and Paul Reeder and Edward Shapiro’s PAR Capital Management.
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Wayfair Inc (NYSE:W) but similarly valued. We will take a look at Hill-Rom Holdings, Inc. (NYSE:HRC), Aspen Technology, Inc. (NASDAQ:AZPN), Cypress Semiconductor Corporation (NASDAQ:CY), and Apple Hospitality REIT Inc (NYSE:APLE). This group of stocks’ market caps resemble W’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| HRC | 32 | 503564 | 1 |
| AZPN | 17 | 434102 | -2 |
| CY | 31 | 366691 | 6 |
| APLE | 11 | 27793 | 4 |
As you can see these stocks had an average of 23 hedge funds with bullish positions and the average amount invested in these stocks was $333 million. That figure was $379 million in W’s case. Hill-Rom Holdings, Inc. (NYSE:HRC) is the most popular stock in this table. On the other hand Apple Hospitality REIT Inc (NYSE:APLE) is the least popular one with only 11 bullish hedge fund positions. Wayfair Inc (NYSE:W) 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 HRC might be a better candidate to consider a long position.
Disclosure: None
