Hedge Funds Are Piling Into Westwater Resources, Inc. (WWR)

We know that hedge funds generate strong, risk-adjusted returns over the long run, therefore imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, smart money investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn’t mean that they don’t have occasional colossal losses; they do (like Melvin Capital’s recent GameStop losses). However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, as the current round of 13F filings has just ended, let’s examine the smart money sentiment towards Westwater Resources, Inc. (NYSE:WWR).

Is Westwater Resources, Inc. (NYSE:WWR) the right pick for your portfolio? Hedge funds were in an optimistic mood. The number of bullish hedge fund positions increased by 5 lately. Westwater Resources, Inc. (NYSE:WWR) was in 6 hedge funds’ portfolios at the end of the first quarter of 2021. The all time high for this statistic was previously 3. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that WWR isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings). There were 1 hedge funds in our database with WWR positions at the end of the fourth quarter.

So, why do we pay attention to hedge fund sentiment before making any investment decisions? 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 more than 115 percentage points since March 2017 (see the details here). We have been able to outperform the passive index funds by tracking the moves of corporate insiders and hedge funds, and we believe small investors can benefit a lot from reading hedge fund investor letters and 13F filings.

Donald Sussman of Paloma Partners

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, an activist hedge fund owns nearly 40% of this $24 biotech stock and is trying to buy the rest for around $50. So, we recommended a long position to our monthly premium newsletter subscribers. We go through lists like the 10 best battery 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 take a look at the recent hedge fund action regarding Westwater Resources, Inc. (NYSE:WWR).

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

At the end of the first quarter, a total of 6 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 500% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards WWR over the last 23 quarters. With hedgies’ capital changing hands, there exists an “upper tier” of noteworthy hedge fund managers who were boosting their holdings substantially (or already accumulated large positions).

The largest stake in Westwater Resources, Inc. (NYSE:WWR) was held by Citadel Investment Group, which reported holding $2.5 million worth of stock at the end of December. It was followed by Engineers Gate Manager with a $0.7 million position. Other investors bullish on the company included Citadel Investment Group, Paloma Partners, and OZ Management. In terms of the portfolio weights assigned to each position 0 allocated the biggest weight to Westwater Resources, Inc. (NYSE:WWR), around 0.03% of its 13F portfolio. 0 is also relatively very bullish on the stock, setting aside 0.01 percent of its 13F equity portfolio to WWR.

Consequently, specific money managers were leading the bulls’ herd. Engineers Gate Manager, managed by Greg Eisner, initiated the largest position in Westwater Resources, Inc. (NYSE:WWR). Engineers Gate Manager had $0.7 million invested in the company at the end of the quarter. Ken Griffin’s Citadel Investment Group also initiated a $0.5 million position during the quarter. The other funds with brand new WWR positions are Donald Sussman’s Paloma Partners, Daniel S. Och’s OZ Management, and Matthew Hulsizer’s PEAK6 Capital Management.

Let’s now review hedge fund activity in other stocks similar to Westwater Resources, Inc. (NYSE:WWR). We will take a look at Aesthetic Medical International Holdings Group Ltd. (NASDAQ:AIH), First Guaranty Bancshares, Inc. (NASDAQ:FGBI), XpresSpa Group, Inc. (NASDAQ:XSPA), Pixelworks, Inc. (NASDAQ:PXLW), ESSA Bancorp, Inc. (NASDAQ:ESSA), Lincoln Educational Services Corporation (NASDAQ:LINC), and Caledonia Mining Corporation Plc (NYSE:CMCL). All of these stocks’ market caps resemble WWR’s market cap.

View table here if you experience formatting issues.

As you can see these stocks had an average of 4.4 hedge funds with bullish positions and the average amount invested in these stocks was $10 million. That figure was $2 million in WWR’s case. Lincoln Educational Services Corporation (NASDAQ:LINC) is the most popular stock in this table. On the other hand Aesthetic Medical International Holdings Group Ltd. (NASDAQ:AIH) is the least popular one with only 1 bullish hedge fund positions. Westwater Resources, Inc. (NYSE:WWR) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for WWR is 62.7. 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 19.3% in 2021 through June 25th and beat the market again by 4.8 percentage points. Unfortunately WWR wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on WWR were disappointed as the stock returned -3.5% since the end of March (through 6/25) 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.