We know that hedge funds generate strong, risk-adjusted returns over the long run, which is why imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, professional 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. However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, let’s examine the smart money sentiment towards WisdomTree Investments, Inc. (NASDAQ:WETF) and determine whether hedge funds skillfully traded this stock.
WisdomTree Investments, Inc. (NASDAQ:WETF) has experienced a decrease in support from the world’s most elite money managers of late. WisdomTree Investments, Inc. (NASDAQ:WETF) was in 18 hedge funds’ portfolios at the end of June. The all time high for this statistics is 20. There were 20 hedge funds in our database with WETF positions at the end of the first quarter. Our calculations also showed that WETF isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings and see the video for a quick look at the top 5 stocks).
Video: Watch our video about the top 5 most popular hedge fund stocks.
In the 21st century investor’s toolkit there are a large number of tools shareholders can use to appraise stocks. A pair of the best tools are hedge fund and insider trading moves. Our researchers have shown that, historically, those who follow the top picks of the elite hedge fund managers can beat the S&P 500 by a solid margin (see the details here).
Cliff Asness of AQR Capital Management
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we are checking out this junior gold mining stock and we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 10 most profitable companies in the world to pick the best large-cap stocks to buy. 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 website to get excerpts of these letters in your inbox. Keeping this in mind we’re going to take a glance at the key hedge fund action surrounding WisdomTree Investments, Inc. (NASDAQ:WETF).
What does smart money think about WisdomTree Investments, Inc. (NASDAQ:WETF)?
Heading into the third quarter of 2020, a total of 18 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -10% from the first quarter of 2020. Below, you can check out the change in hedge fund sentiment towards WETF over the last 20 quarters. With hedgies’ capital changing hands, there exists a select group of noteworthy hedge fund managers who were boosting their holdings significantly (or already accumulated large positions).
When looking at the institutional investors followed by Insider Monkey, Renaissance Technologies, holds the most valuable position in WisdomTree Investments, Inc. (NASDAQ:WETF). Renaissance Technologies has a $13 million position in the stock, comprising less than 0.1%% of its 13F portfolio. Sitting at the No. 2 spot is D. E. Shaw of D E Shaw, with a $5.1 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Some other peers that hold long positions contain Paul Marshall and Ian Wace’s Marshall Wace LLP, Ken Griffin’s Citadel Investment Group and Ken Fisher’s Fisher Asset Management. In terms of the portfolio weights assigned to each position BlueMar Capital Management allocated the biggest weight to WisdomTree Investments, Inc. (NASDAQ:WETF), around 0.39% of its 13F portfolio. CSat Investment Advisory is also relatively very bullish on the stock, dishing out 0.11 percent of its 13F equity portfolio to WETF.
Since WisdomTree Investments, Inc. (NASDAQ:WETF) has faced bearish sentiment from the aggregate hedge fund industry, we can see that there exists a select few money managers that slashed their full holdings in the second quarter. At the top of the heap, Jeffrey Jacobowitz’s Simcoe Capital Management said goodbye to the biggest stake of the 750 funds tracked by Insider Monkey, valued at an estimated $8.3 million in stock. Greg Eisner’s fund, Engineers Gate Manager, also sold off its stock, about $0.2 million worth. These bearish behaviors are intriguing to say the least, as total hedge fund interest dropped by 2 funds in the second quarter.
Let’s now take a look at hedge fund activity in other stocks similar to WisdomTree Investments, Inc. (NASDAQ:WETF). We will take a look at Helix Energy Solutions Group Inc. (NYSE:HLX), Myers Industries, Inc. (NYSE:MYE), Groupon Inc (NASDAQ:GRPN), ProPetro Holding Corp. (NYSE:PUMP), El Pollo LoCo Holdings Inc (NASDAQ:LOCO), Allegiance Bancshares, Inc. (NASDAQ:ABTX), and Camden National Corporation (NASDAQ:CAC). All of these stocks’ market caps resemble WETF’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| HLX | 10 | 9854 | 0 |
| MYE | 11 | 91599 | -2 |
| GRPN | 19 | 69863 | 1 |
| PUMP | 18 | 52445 | 5 |
| LOCO | 10 | 20267 | 1 |
| ABTX | 5 | 5302 | -1 |
| CAC | 12 | 45871 | 2 |
| Average | 12.1 | 42172 | 0.9 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 12.1 hedge funds with bullish positions and the average amount invested in these stocks was $42 million. That figure was $35 million in WETF’s case. Groupon Inc (NASDAQ:GRPN) is the most popular stock in this table. On the other hand Allegiance Bancshares, Inc. (NASDAQ:ABTX) is the least popular one with only 5 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 76.4. 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 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 24.8% in 2020 through the end of September and beat the market by 19.3 percentage points. Unfortunately WETF wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on WETF were disappointed as the stock returned -7.1% in Q3 and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.
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Disclosure: None. This article was originally published at Insider Monkey.
