While the market driven by short-term sentiment influenced by the accommodative interest rate environment in the US, virus news and stimulus spending, many smart money investors are starting to get cautious towards the current bull run since March, 2020 and hedging or reducing many of their long positions. Some fund managers are betting on Dow hitting 40,000 to generate strong returns. However, as we know, big investors usually buy stocks with strong fundamentals that can deliver gains both in bull and bear markets, which is why we believe we can profit from imitating them. In this article, we are going to take a look at the smart money sentiment surrounding Welbilt, Inc. (NYSE:WBT).
Is Welbilt, Inc. (NYSE:WBT) the right pick for your portfolio? Prominent investors were turning bullish. The number of long hedge fund positions moved up by 3 in recent months. Welbilt, Inc. (NYSE:WBT) was in 28 hedge funds’ portfolios at the end of March. 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 Q1 rankings). There were 25 hedge funds in our database with WBT positions at the end of the fourth 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 206.8% since March 2017 and outperformed the S&P 500 ETFs by more than 115 percentage points (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
Jeffrey Gates of Gates Capital
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, economists warn of inflation flare up. So, we are checking out this backdoor gold play that has hit peak gains of 718% in a little over a year. 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 let’s take a glance at the new hedge fund action regarding Welbilt, Inc. (NYSE:WBT).
Do Hedge Funds Think WBT Is A Good Stock To Buy Now?
Heading into the second quarter of 2021, a total of 28 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 12% from the previous quarter. The graph below displays the number of hedge funds with bullish position in WBT over the last 23 quarters. With hedge funds’ sentiment swirling, there exists an “upper tier” of key hedge fund managers who were increasing their stakes substantially (or already accumulated large positions).
When looking at the institutional investors followed by Insider Monkey, Carl Icahn’s Icahn Capital LP has the largest position in Welbilt, Inc. (NYSE:WBT), worth close to $194.1 million, accounting for 0.8% of its total 13F portfolio. Sitting at the No. 2 spot is Gates Capital Management, managed by Jeffrey Gates, which holds a $52.6 million position; 1.9% of its 13F portfolio is allocated to the company. Some other members of the smart money with similar optimism contain D. E. Shaw’s D E Shaw, Ken Griffin’s Citadel Investment Group and Israel Englander’s Millennium Management. In terms of the portfolio weights assigned to each position One Fin Capital Management allocated the biggest weight to Welbilt, Inc. (NYSE:WBT), around 4.06% of its 13F portfolio. 13D Management is also relatively very bullish on the stock, dishing out 3.77 percent of its 13F equity portfolio to WBT.
Now, key money managers have jumped into Welbilt, Inc. (NYSE:WBT) headfirst. Arrowstreet Capital, managed by Peter Rathjens, Bruce Clarke and John Campbell, initiated the most valuable position in Welbilt, Inc. (NYSE:WBT). Arrowstreet Capital had $8.3 million invested in the company at the end of the quarter. Anand Parekh’s Alyeska Investment Group also initiated a $5.4 million position during the quarter. The other funds with brand new WBT positions are Christopher Hillary’s Roubaix Capital, John Bader’s Halcyon Asset Management, and Michael Gelband’s ExodusPoint Capital.
Let’s now review hedge fund activity in other stocks similar to Welbilt, Inc. (NYSE:WBT). These stocks are Phreesia, Inc. (NYSE:PHR), PQ Group Holdings Inc. (NYSE:PQG), Greatbatch Inc (NYSE:GB), Dave & Buster’s Entertainment, Inc. (NASDAQ:PLAY), Xperi Holding Corporation (NASDAQ:XPER), South Jersey Industries Inc (NYSE:SJI), and Nuvation Bio Inc. (NYSE:NUVB). This group of stocks’ market valuations are closest to WBT’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| PHR | 27 | 213201 | 1 |
| PQG | 8 | 32900 | -1 |
| GB | 16 | 1810814 | 1 |
| PLAY | 24 | 540055 | 3 |
| XPER | 21 | 155873 | -1 |
| SJI | 32 | 482342 | 20 |
| NUVB | 30 | 543947 | 30 |
| Average | 22.6 | 539876 | 7.6 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 22.6 hedge funds with bullish positions and the average amount invested in these stocks was $540 million. That figure was $400 million in WBT’s case. South Jersey Industries Inc (NYSE:SJI) is the most popular stock in this table. On the other hand PQ Group Holdings Inc. (NYSE:PQG) is the least popular one with only 8 bullish hedge fund positions. Welbilt, Inc. (NYSE:WBT) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for WBT is 79.7. 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. 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% in 2021 through July 9th and still beat the market by 6.7 percentage points. Hedge funds were also right about betting on WBT as the stock returned 53.2% since the end of Q1 (through 7/9) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
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Disclosure: None. This article was originally published at Insider Monkey.
