We at Insider Monkey have gone over 866 13F filings that hedge funds and prominent investors are required to file by the SEC. The 13F filings show the funds’ and investors’ portfolio positions as of March 31st. In this article, we look at what those funds think of Wayfair Inc (NYSE:W) based on that data.
Wayfair Inc (NYSE:W) has experienced a decrease in support from the world’s most elite money managers recently. Wayfair Inc (NYSE:W) was in 37 hedge funds’ portfolios at the end of March. The all time high for this statistic is 41. There were 40 hedge funds in our database with W positions at the end of the fourth quarter. Our calculations also showed that W isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings).
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.
Alex Sacerdote of Whale Rock Capital Management
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Do Hedge Funds Think W Is A Good Stock To Buy Now?
At the end of March, a total of 37 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -8% from the fourth quarter of 2020. By comparison, 34 hedge funds held shares or bullish call options in W a year ago. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Spruce House Investment Management held the most valuable stake in Wayfair Inc (NYSE:W), which was worth $1510.8 million at the end of the fourth quarter. On the second spot was Bares Capital Management which amassed $814.6 million worth of shares. Whale Rock Capital Management, Nantahala Capital Management, and Two Sigma Advisors 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 Spruce House Investment Management allocated the biggest weight to Wayfair Inc (NYSE:W), around 43.33% of its 13F portfolio. Bares Capital Management is also relatively very bullish on the stock, designating 15.23 percent of its 13F equity portfolio to W.
Seeing as Wayfair Inc (NYSE:W) has faced a decline in interest from hedge fund managers, logic holds that there lies a certain “tier” of fund managers that slashed their full holdings in the first quarter. It’s worth mentioning that Matthew Hulsizer’s PEAK6 Capital Management said goodbye to the largest investment of the 750 funds watched by Insider Monkey, valued at an estimated $14.5 million in stock, and Chen Tianqiao’s Shanda Asset Management was right behind this move, as the fund dropped about $13.5 million worth. These transactions are important to note, as total hedge fund interest was cut by 3 funds in the first quarter.
Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Wayfair Inc (NYSE:W) but similarly valued. These stocks are Yum! Brands, Inc. (NYSE:YUM), Stanley Black & Decker, Inc. (NYSE:SWK), D.R. Horton, Inc. (NYSE:DHI), CoStar Group Inc (NASDAQ:CSGP), TAL Education Group (NYSE:TAL), PACCAR Inc (NASDAQ:PCAR), and TransDigm Group Incorporated (NYSE:TDG). This group of stocks’ market valuations match W’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| YUM | 32 | 751481 | -1 |
| SWK | 33 | 993045 | -5 |
| DHI | 50 | 2174422 | -14 |
| CSGP | 43 | 2784728 | -8 |
| TAL | 38 | 1373412 | 9 |
| PCAR | 28 | 626282 | -6 |
| TDG | 62 | 6290864 | -2 |
| Average | 40.9 | 2142033 | -3.9 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 40.9 hedge funds with bullish positions and the average amount invested in these stocks was $2142 million. That figure was $4013 million in W’s case. TransDigm Group Incorporated (NYSE:TDG) is the most popular stock in this table. On the other hand PACCAR Inc (NASDAQ:PCAR) is the least popular one with only 28 bullish hedge fund positions. Wayfair Inc (NYSE:W) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for W is 42.3. 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 negative signal and 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 surpassed the market again by 4.8 percentage points. Unfortunately W wasn’t nearly as popular as these 5 stocks (hedge fund sentiment was quite bearish); W investors were disappointed as the stock returned 2.1% 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 most of these stocks already outperformed the market in 2021.
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Disclosure: None. This article was originally published at Insider Monkey.
