Before we spend days researching a stock idea we like to take a look at how hedge funds and billionaire investors recently traded that stock. Russell 2000 ETF (IWM) lagged the larger S&P 500 ETF (SPY) by more than 10 percentage points since the end of the third quarter of 2018. This means hedge funds that are allocating a higher percentage of their portfolio to small-cap stocks were probably underperforming the market. However, this also means that as small-cap stocks start to mean revert, these hedge funds will start delivering better returns than the S&P 500 Index funds. In this article, we will take a look at what hedge funds think about Westport Fuel Systems Inc. (NASDAQ:WPRT).
Westport Fuel Systems Inc. (NASDAQ:WPRT) shares haven’t seen a lot of action during the third quarter. Overall, hedge fund sentiment was unchanged. The stock was in 13 hedge funds’ portfolios at the end of September. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Exantas Capital Corp. (NYSE:XAN), Camtek LTD. (NASDAQ:CAMT), and TrueCar Inc (NASDAQ:TRUE) to gather more data points. Our calculations also showed that WPRT isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings).
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
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 flagship best performing hedge funds strategy returned 91% since May 2014 and outperformed the Russell 2000 ETFs by nearly 40 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
Philip Hempleman of Ardsley Partners
We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world’s largest cannabis market, so we check out this European marijuana stock pitch. One of the most bullish analysts in America just put his money where his mouth is. He says, “I’m investing more today than I did back in early 2009.” So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We also rely on the best performing hedge funds‘ buy/sell signals. We’re going to take a gander at the latest hedge fund action regarding Westport Fuel Systems Inc. (NASDAQ:WPRT).
Hedge fund activity in Westport Fuel Systems Inc. (NASDAQ:WPRT)
Heading into the fourth quarter of 2019, a total of 13 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 0% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards WPRT over the last 17 quarters. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Westport Fuel Systems Inc. (NASDAQ:WPRT) was held by Royce & Associates, which reported holding $17.3 million worth of stock at the end of September. It was followed by Manatuck Hill Partners with a $6.2 million position. Other investors bullish on the company included Renaissance Technologies, Millennium Management, and Ardsley Partners. In terms of the portfolio weights assigned to each position Manatuck Hill Partners allocated the biggest weight to Westport Fuel Systems Inc. (NASDAQ:WPRT), around 3.4% of its 13F portfolio. Trellus Management Company is also relatively very bullish on the stock, designating 1.09 percent of its 13F equity portfolio to WPRT.
Earlier we told you that the aggregate hedge fund interest in the stock was unchanged and we view this as a negative development. Even though there weren’t any hedge funds dumping their holdings during the third quarter, there weren’t any hedge funds initiating brand new positions. This indicates that hedge funds, at the very best, perceive this stock as dead money and they haven’t identified any viable catalysts that can attract investor attention.
Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Westport Fuel Systems Inc. (NASDAQ:WPRT) but similarly valued. We will take a look at Exantas Capital Corp. (NYSE:XAN), Camtek LTD. (NASDAQ:CAMT), TrueCar Inc (NASDAQ:TRUE), and Yintech Investment Holdings Limited (NASDAQ:YIN). This group of stocks’ market caps resemble WPRT’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| XAN | 15 | 67814 | -1 |
| CAMT | 10 | 24660 | 0 |
| TRUE | 15 | 66619 | 0 |
| YIN | 1 | 362 | 0 |
| Average | 10.25 | 39864 | -0.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 10.25 hedge funds with bullish positions and the average amount invested in these stocks was $40 million. That figure was $39 million in WPRT’s case. Exantas Capital Corp. (NYSE:XAN) is the most popular stock in this table. On the other hand Yintech Investment Holdings Limited (NASDAQ:YIN) is the least popular one with only 1 bullish hedge fund positions. Westport Fuel Systems Inc. (NASDAQ:WPRT) is not the most popular stock in this group but hedge fund interest is still above average. 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 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately WPRT wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on WPRT were disappointed as the stock returned -10.3% during the fourth quarter (through the end of November) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.
Disclosure: None. This article was originally published at Insider Monkey.
