The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. Insider Monkey finished processing 821 13F filings submitted by hedge funds and prominent investors. These filings show these funds’ portfolio positions as of March 31st, 2020. In this article we are going to take a look at smart money sentiment towards WEX Inc (NYSE:WEX).
Is WEX Inc (NYSE:WEX) ready to rally soon? Investors who are in the know are taking a bullish view. The number of long hedge fund positions rose by 10 recently. Our calculations also showed that WEX isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks). WEX was in 35 hedge funds’ portfolios at the end of March. There were 25 hedge funds in our database with WEX positions at the end of the previous quarter.
Video: Watch our video about the top 5 most popular hedge fund stocks.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 51 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 underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.
Paul Reeder of PAR Capital Management
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, 2020’s unprecedented market conditions provide us with the highest number of trading opportunities in a decade. So we are checking out trades like this one. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind we’re going to go over the latest hedge fund action surrounding WEX Inc (NYSE:WEX).
How are hedge funds trading WEX Inc (NYSE:WEX)?
Heading into the second quarter of 2020, a total of 35 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 40% from the fourth quarter of 2019. The graph below displays the number of hedge funds with bullish position in WEX over the last 18 quarters. With hedgies’ positions undergoing their usual ebb and flow, there exists a select group of key hedge fund managers who were increasing their holdings substantially (or already accumulated large positions).
According to Insider Monkey’s hedge fund database, PAR Capital Management, managed by Paul Reeder and Edward Shapiro, holds the biggest position in WEX Inc (NYSE:WEX). PAR Capital Management has a $83.6 million position in the stock, comprising 3.6% of its 13F portfolio. Coming in second is Echo Street Capital Management, led by Greg Poole, holding a $63 million position; the fund has 1.4% of its 13F portfolio invested in the stock. Remaining hedge funds and institutional investors that are bullish encompass Robert Pitts’s Steadfast Capital Management, Dmitry Balyasny’s Balyasny Asset Management and Andrew Immerman and Jeremy Schiffman’s Palestra Capital Management. In terms of the portfolio weights assigned to each position PAR Capital Management allocated the biggest weight to WEX Inc (NYSE:WEX), around 3.55% of its 13F portfolio. Red Cedar Management is also relatively very bullish on the stock, dishing out 3.04 percent of its 13F equity portfolio to WEX.
With a general bullishness amongst the heavyweights, some big names were leading the bulls’ herd. Steadfast Capital Management, managed by Robert Pitts, established the most outsized position in WEX Inc (NYSE:WEX). Steadfast Capital Management had $53.1 million invested in the company at the end of the quarter. Andrew Immerman and Jeremy Schiffman’s Palestra Capital Management also made a $30.8 million investment in the stock during the quarter. The other funds with new positions in the stock are Leon Shaulov’s Maplelane Capital, Joel Greenblatt’s Gotham Asset Management, and Paul Marshall and Ian Wace’s Marshall Wace LLP.
Let’s check out hedge fund activity in other stocks similar to WEX Inc (NYSE:WEX). These stocks are Momo Inc (NASDAQ:MOMO), Pilgrim’s Pride Corporation (NASDAQ:PPC), Woori Financial Group Inc. (NYSE:WF), and Quanta Services Inc (NYSE:PWR). This group of stocks’ market values are closest to WEX’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| MOMO | 25 | 585481 | -13 |
| PPC | 18 | 122135 | -6 |
| WF | 3 | 2382 | 0 |
| PWR | 28 | 1509183 | -16 |
| Average | 18.5 | 554795 | -8.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 18.5 hedge funds with bullish positions and the average amount invested in these stocks was $555 million. That figure was $355 million in WEX’s case. Quanta Services Inc (NYSE:PWR) is the most popular stock in this table. On the other hand Woori Financial Group Inc. (NYSE:WF) is the least popular one with only 3 bullish hedge fund positions. Compared to these stocks WEX Inc (NYSE:WEX) is more popular among hedge funds. 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 returned 8.3% in 2020 through the end of May but still managed to beat the market by 13.2 percentage points. Hedge funds were also right about betting on WEX as the stock returned 41.6% so far in Q2 (through the end of May) and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.
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Disclosure: None. This article was originally published at Insider Monkey.
