You probably know from experience that there is not as much information on small-cap companies as there is on large companies. Of course, this makes it really hard and difficult for individual investors to make proper and accurate analysis of certain small-cap companies. However, well-known and successful hedge fund managers like Jeff Ubben, George Soros and Seth Klarman hold the necessary resources and abilities to conduct an extensive stock analysis on small-cap stocks, which enable them to make millions of dollars by identifying potential winners within the small-cap galaxy of stocks. This represents the main reason why Insider Monkey takes notice of the hedge fund activity in these overlooked stocks.
Hedge fund interest in WPP plc (NYSE:WPP) shares was flat at the end of last quarter. This is usually a negative indicator. At the end of this article we will also compare WPP to other stocks including STMicroelectronics N.V. (NYSE:STM), The J.M. Smucker Company (NYSE:SJM), and Telecom Italia S.p.A. (NYSE:TI) to get a better sense of its popularity.
Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research has shown that hedge funds’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the market by 40 percentage points since May 2014 through May 30, 2019 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 30.9% through May 30, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
We’re going to take a peek at the new hedge fund action regarding WPP plc (NYSE:WPP).
How have hedgies been trading WPP plc (NYSE:WPP)?
At the end of the first quarter, a total of 11 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 0% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards WPP over the last 15 quarters. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Renaissance Technologies was the largest shareholder of WPP plc (NYSE:WPP), with a stake worth $33.1 million reported as of the end of March. Trailing Renaissance Technologies was Arrowstreet Capital, which amassed a stake valued at $4.5 million. Two Sigma Advisors, D E Shaw, and Millennium Management were also very fond of the stock, giving the stock large weights in their portfolios.
Seeing as WPP plc (NYSE:WPP) has experienced a decline in interest from the aggregate hedge fund industry, logic holds that there lies a certain “tier” of fund managers that slashed their entire stakes in the third quarter. Interestingly, D. E. Shaw’s D E Shaw sold off the biggest investment of the 700 funds followed by Insider Monkey, comprising close to $1.1 million in stock, and Murray Stahl’s Horizon Asset Management was right behind this move, as the fund dumped about $0.3 million worth. These transactions are important to note, as total hedge fund interest stayed the same (this is a bearish signal in our experience).
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as WPP plc (NYSE:WPP) but similarly valued. We will take a look at STMicroelectronics N.V. (NYSE:STM), The J.M. Smucker Company (NYSE:SJM), Telecom Italia S.p.A. (NYSE:TI), and Godaddy Inc (NYSE:GDDY). This group of stocks’ market values are similar to WPP’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| STM | 14 | 120394 | 3 |
| SJM | 26 | 574357 | 6 |
| TI | 1 | 4809 | -2 |
| GDDY | 48 | 2821575 | 5 |
| Average | 22.25 | 880284 | 3 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 22.25 hedge funds with bullish positions and the average amount invested in these stocks was $880 million. That figure was $52 million in WPP’s case. Godaddy Inc (NYSE:GDDY) is the most popular stock in this table. On the other hand Telecom Italia S.p.A. (NYSE:TI) is the least popular one with only 1 bullish hedge fund positions. WPP plc (NYSE:WPP) is not the least popular stock in this group but hedge fund interest is still below average. Our calculations showed that top 20 most popular stocks among hedge funds returned 6.2% in Q2 through June 19th and outperformed the S&P 500 ETF (SPY) by nearly 3 percentage points. A small number of hedge funds were also right about betting on WPP as the stock returned 23.4% during the same time frame and outperformed the market by an even larger margin.
Disclosure: None. This article was originally published at Insider Monkey.
