At Insider Monkey, we pore over the filings of nearly 873 top investment firms every quarter, a process we have now completed for the latest reporting period. The data we’ve gathered as a result gives us access to a wealth of collective knowledge based on these firms’ portfolio holdings as of June 30th. In this article, we will use that wealth of knowledge to determine whether or not WisdomTree Investments, Inc. (NASDAQ:WETF) makes for a good investment right now.
WisdomTree Investments, Inc. (NASDAQ:WETF) investors should be aware of an increase in enthusiasm from smart money lately. WisdomTree Investments, Inc. (NASDAQ:WETF) was in 26 hedge funds’ portfolios at the end of the second quarter of 2021. The all time high for this statistic was previously 22. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. There were 18 hedge funds in our database with WETF holdings at the end of March. Our calculations also showed that WETF isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings).
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.
Israel Englander of Millennium Management
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. We go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our homepage. Now we’re going to analyze the latest hedge fund action surrounding WisdomTree Investments, Inc. (NASDAQ:WETF).
Do Hedge Funds Think WETF Is A Good Stock To Buy Now?
Heading into the third quarter of 2021, a total of 26 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 44% from the previous quarter. By comparison, 18 hedge funds held shares or bullish call options in WETF a year ago. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Azora Capital was the largest shareholder of WisdomTree Investments, Inc. (NASDAQ:WETF), with a stake worth $25.1 million reported as of the end of June. Trailing Azora Capital was Millennium Management, which amassed a stake valued at $10.4 million. Renaissance Technologies, Gillson Capital, and Fisher Asset 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 Azora Capital allocated the biggest weight to WisdomTree Investments, Inc. (NASDAQ:WETF), around 3.9% of its 13F portfolio. Diametric Capital is also relatively very bullish on the stock, dishing out 0.92 percent of its 13F equity portfolio to WETF.
With a general bullishness amongst the heavyweights, key hedge funds have jumped into WisdomTree Investments, Inc. (NASDAQ:WETF) headfirst. Tudor Investment Corp, managed by Paul Tudor Jones, established the most outsized position in WisdomTree Investments, Inc. (NASDAQ:WETF). Tudor Investment Corp had $0.8 million invested in the company at the end of the quarter. Michael Gelband’s ExodusPoint Capital also initiated a $0.7 million position during the quarter. The other funds with brand new WETF positions are Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital, Donald Sussman’s Paloma Partners, and Noam Gottesman’s GLG Partners.
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as WisdomTree Investments, Inc. (NASDAQ:WETF) but similarly valued. We will take a look at The Gorman-Rupp Company (NYSE:GRC), Rite Aid Corporation (NYSE:RAD), Global Medical REIT Inc. (NYSE:GMRE), Westport Fuel Systems Inc. (NASDAQ:WPRT), ORBCOMM Inc (NASDAQ:ORBC), Arcturus Therapeutics Holdings Inc. (NASDAQ:ARCT), and SFL Corporation Ltd. (NYSE:SFL). This group of stocks’ market caps are similar to WETF’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| GRC | 8 | 27052 | 0 |
| RAD | 11 | 21095 | -5 |
| GMRE | 10 | 24887 | -8 |
| WPRT | 16 | 61381 | 1 |
| ORBC | 26 | 169669 | 7 |
| ARCT | 13 | 155410 | -2 |
| SFL | 18 | 54048 | 4 |
| Average | 14.6 | 73363 | -0.4 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 14.6 hedge funds with bullish positions and the average amount invested in these stocks was $73 million. That figure was $79 million in WETF’s case. ORBCOMM Inc (NASDAQ:ORBC) is the most popular stock in this table. On the other hand The Gorman-Rupp Company (NYSE:GRC) is the least popular one with only 8 bullish hedge fund positions. WisdomTree Investments, Inc. (NASDAQ:WETF) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for WETF is 90. 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. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. 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 24.9% in 2021 through October 15th and beat the market again by 4.5 percentage points. Unfortunately WETF wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on WETF were disappointed as the stock returned -7.5% since the end of June (through 10/15) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as many of these stocks already outperformed the market since 2019.
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Disclosure: None. This article was originally published at Insider Monkey.
