We hate to say this but, we told you so. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW and predicted a US recession when the S&P 500 Index was trading at the 3150 level. We also told you to short the market and buy long-term Treasury bonds. Our article also called for a total international travel ban. While we were warning you, President Trump minimized the threat and failed to act promptly. As a result of his inaction, we will now experience a deeper recession (see why hell is coming).
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. Keeping this in mind, let’s take a look at whether Weight Watchers International, Inc. (NASDAQ:WW) is a good investment right now. We check hedge fund and billionaire investor sentiment before delving into hours of research. Hedge funds spend millions of dollars on Ivy League graduates, unconventional data sources, expert networks, and get tips from investment bankers and industry insiders. Sure they sometimes fail miserably, but their consensus stock picks historically outperformed the market after adjusting for known risk factors.
Is Weight Watchers International, Inc. (NASDAQ:WW) a buy right now? Investors who are in the know are turning bullish. The number of long hedge fund bets inched up by 6 recently. Our calculations also showed that WW isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of this article for Q3 rankings).
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by more than 41 percentage points since March 2017 (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 35.3% through March 3rd. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Ricky Sandler of Eminence Capital
We leave no stone unturned when looking for the next great investment idea. For example we recently identified a stock that trades 25% below the net cash on its balance sheet. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences, and go through short-term trade recommendations like this one. We even check out the recommendations of services with hard to believe track records. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Now we’re going to take a look at the new hedge fund action encompassing Weight Watchers International, Inc. (NASDAQ:WW).
What does smart money think about Weight Watchers International, Inc. (NASDAQ:WW)?
At the end of the fourth quarter, a total of 37 of the hedge funds tracked by Insider Monkey were long this stock, a change of 19% from the previous quarter. The graph below displays the number of hedge funds with bullish position in WW over the last 18 quarters. With hedge funds’ capital changing hands, there exists a select group of key hedge fund managers who were adding to their stakes meaningfully (or already accumulated large positions).
The largest stake in Weight Watchers International, Inc. (NASDAQ:WW) was held by Eminence Capital, which reported holding $114.9 million worth of stock at the end of September. It was followed by Iridian Asset Management with a $78.6 million position. Other investors bullish on the company included Empyrean Capital Partners, D E Shaw, and ThornTree Capital Partners. In terms of the portfolio weights assigned to each position ThornTree Capital Partners allocated the biggest weight to Weight Watchers International, Inc. (NASDAQ:WW), around 8.4% of its 13F portfolio. Empyrean Capital Partners is also relatively very bullish on the stock, setting aside 4.02 percent of its 13F equity portfolio to WW.
As one would reasonably expect, key money managers have jumped into Weight Watchers International, Inc. (NASDAQ:WW) headfirst. ThornTree Capital Partners, managed by Mark Moore, established the biggest position in Weight Watchers International, Inc. (NASDAQ:WW). ThornTree Capital Partners had $30.5 million invested in the company at the end of the quarter. Steve Cohen’s Point72 Asset Management also initiated a $28.7 million position during the quarter. The other funds with new positions in the stock are Zachary Miller’s Parian Global Management, Louis Bacon’s Moore Global Investments, and Brett Hendrickson’s Nokomis Capital.
Let’s now review hedge fund activity in other stocks similar to Weight Watchers International, Inc. (NASDAQ:WW). These stocks are AAON, Inc. (NASDAQ:AAON), Tower Semiconductor Ltd. (NASDAQ:TSEM), WesBanco, Inc. (NASDAQ:WSBC), and National Vision Holdings, Inc. (NASDAQ:EYE). All of these stocks’ market caps are closest to WW’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| AAON | 7 | 11949 | 0 |
| TSEM | 16 | 431900 | 2 |
| WSBC | 11 | 56936 | 0 |
| EYE | 15 | 387263 | -10 |
| Average | 12.25 | 222012 | -2 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 12.25 hedge funds with bullish positions and the average amount invested in these stocks was $222 million. That figure was $514 million in WW’s case. Tower Semiconductor Ltd. (NASDAQ:TSEM) is the most popular stock in this table. On the other hand AAON, Inc. (NASDAQ:AAON) is the least popular one with only 7 bullish hedge fund positions. Compared to these stocks Weight Watchers International, Inc. (NASDAQ:WW) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks lost 17.4% in 2020 through March 25th and still beat the market by 5.5 percentage points. Unfortunately WW wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on WW were disappointed as the stock returned -55.1% during the first two and a half months of 2020 (through March 25th) 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 most of these stocks already outperformed the market in Q1.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.
