Although the masses and most of the financial media blame hedge funds for their exorbitant fee structure and disappointing performance, these investors have proved to have great stock picking abilities over the years (that’s why their assets under management continue to swell). We believe hedge fund sentiment should serve as a crucial tool of an individual investor’s stock selection process, as it may offer great insights of how the brightest minds of the finance industry feel about specific stocks. After all, these people have access to smartest analysts and expensive data/information sources that individual investors can’t match. So should one consider investing in Welbilt, Inc. (NYSE:WBT)? The smart money sentiment can provide an answer to this question.
Is Welbilt, Inc. (NYSE:WBT) a buy, sell, or hold? Hedge funds were getting more bullish. The number of long hedge fund positions went up by 16 lately. Welbilt, Inc. (NYSE:WBT) was in 44 hedge funds’ portfolios at the end of the second quarter of 2021. The all time high for this statistic is 28. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that WBT isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings). There were 28 hedge funds in our database with WBT positions at the end of the first quarter.
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 monthly stock picks returned 185.4% since March 2017 and outperformed the S&P 500 ETFs by more than 79 percentage points (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
Matthew Halbower of Pentwater Capital
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. Keeping this in mind we’re going to go over the recent hedge fund action surrounding Welbilt, Inc. (NYSE:WBT).
Do Hedge Funds Think WBT Is A Good Stock To Buy Now?
Heading into the third quarter of 2021, a total of 44 of the hedge funds tracked by Insider Monkey were long this stock, a change of 57% from the first quarter of 2020. By comparison, 22 hedge funds held shares or bullish call options in WBT a year ago. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Icahn Capital LP held the most valuable stake in Welbilt, Inc. (NYSE:WBT), which was worth $258.1 million at the end of the second quarter. On the second spot was Pentwater Capital Management which amassed $79.3 million worth of shares. Magnetar Capital, TIG Advisors, and Water Island Capital 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 One Fin Capital Management allocated the biggest weight to Welbilt, Inc. (NYSE:WBT), around 5.94% of its 13F portfolio. Water Island Capital is also relatively very bullish on the stock, earmarking 3.16 percent of its 13F equity portfolio to WBT.
Now, key hedge funds were leading the bulls’ herd. Pentwater Capital Management, managed by Matthew Halbower, assembled the biggest position in Welbilt, Inc. (NYSE:WBT). Pentwater Capital Management had $79.3 million invested in the company at the end of the quarter. Alec Litowitz and Ross Laser’s Magnetar Capital also initiated a $64.6 million position during the quarter. The other funds with new positions in the stock are Carl Tiedemann and Michael Tiedemann’s TIG Advisors, John Orrico’s Water Island Capital, and Robert Emil Zoellner’s Alpine Associates.
Let’s now review hedge fund activity in other stocks similar to Welbilt, Inc. (NYSE:WBT). We will take a look at AAON, Inc. (NASDAQ:AAON), Insmed Incorporated (NASDAQ:INSM), Cerevel Therapeutics Holdings, Inc. (NASDAQ:CERE), Vishay Intertechnology (NYSE:VSH), PROG Holdings Inc (NYSE:PRG), Casella Waste Systems Inc. (NASDAQ:CWST), and Ingevity Corporation (NYSE:NGVT). All of these stocks’ market caps match WBT’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| AAON | 17 | 42863 | 1 |
| INSM | 22 | 568387 | 0 |
| CERE | 19 | 358524 | -3 |
| VSH | 29 | 500383 | -3 |
| PRG | 37 | 422619 | 3 |
| CWST | 26 | 115419 | 6 |
| NGVT | 21 | 316763 | 1 |
| Average | 24.4 | 332137 | 0.7 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 24.4 hedge funds with bullish positions and the average amount invested in these stocks was $332 million. That figure was $984 million in WBT’s case. PROG Holdings Inc (NYSE:PRG) is the most popular stock in this table. On the other hand AAON, Inc. (NASDAQ:AAON) is the least popular one with only 17 bullish hedge fund positions. Compared to these stocks Welbilt, Inc. (NYSE:WBT) is more popular among hedge funds. Our overall hedge fund sentiment score for WBT 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. 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 22.9% in 2021 through October 1st and still beat the market by 5.6 percentage points. Unfortunately WBT wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on WBT were disappointed as the stock returned 1.7% since the end of the second quarter (through 10/1) 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 most of these stocks already outperformed the market since 2019.
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Disclosure: None. This article was originally published at Insider Monkey.
