Investing in small cap stocks has historically been a way to outperform the market, as small cap companies typically grow faster on average than the blue chips. That outperformance comes with a price, however, as there are occasional periods of higher volatility. The last 12 months is one of those periods, as the Russell 2000 ETF (IWM) has underperformed the larger S&P 500 ETF (SPY) by more than 10 percentage points. Given that the funds we track tend to have a disproportionate amount of their portfolios in smaller cap stocks, they have seen some volatility in their portfolios too. Actually their moves are potentially one of the factors that contributed to this volatility. In this article, we use our extensive database of hedge fund holdings to find out what the smart money thinks of Winmark Corporation (NASDAQ:WINA).
Winmark Corporation (NASDAQ:WINA) was in 9 hedge funds’ portfolios at the end of September. WINA investors should be aware of an increase in hedge fund sentiment recently. There were 6 hedge funds in our database with WINA holdings at the end of the previous quarter. Our calculations also showed that WINA 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.
Noam Gottesman of GLG 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 go over the new hedge fund action regarding Winmark Corporation (NASDAQ:WINA).
How are hedge funds trading Winmark Corporation (NASDAQ:WINA)?
Heading into the fourth quarter of 2019, a total of 9 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 50% from the previous quarter. The graph below displays the number of hedge funds with bullish position in WINA 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.
More specifically, Nine Ten Partners was the largest shareholder of Winmark Corporation (NASDAQ:WINA), with a stake worth $59.3 million reported as of the end of September. Trailing Nine Ten Partners was Renaissance Technologies, which amassed a stake valued at $33.2 million. GLG Partners, Marshall Wace, and Millennium Management were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Nine Ten Partners allocated the biggest weight to Winmark Corporation (NASDAQ:WINA), around 18.77% of its 13F portfolio. Zebra Capital Management is also relatively very bullish on the stock, setting aside 0.27 percent of its 13F equity portfolio to WINA.
Now, key hedge funds were breaking ground themselves. Marshall Wace, managed by Paul Marshall and Ian Wace, created the most valuable position in Winmark Corporation (NASDAQ:WINA). Marshall Wace had $0.6 million invested in the company at the end of the quarter. Israel Englander’s Millennium Management also made a $0.5 million investment in the stock during the quarter. The only other fund with a new position in the stock is Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital.
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Winmark Corporation (NASDAQ:WINA) but similarly valued. These stocks are HomeStreet Inc (NASDAQ:HMST), Great Lakes Dredge & Dock Corporation (NASDAQ:GLDD), Foundation Building Materials, Inc. (NYSE:FBM), and Plug Power, Inc. (NASDAQ:PLUG). This group of stocks’ market caps are similar to WINA’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| HMST | 14 | 31095 | 5 |
| GLDD | 24 | 104208 | 2 |
| FBM | 24 | 74715 | 14 |
| PLUG | 9 | 44087 | 1 |
| Average | 17.75 | 63526 | 5.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 17.75 hedge funds with bullish positions and the average amount invested in these stocks was $64 million. That figure was $96 million in WINA’s case. Great Lakes Dredge & Dock Corporation (NASDAQ:GLDD) is the most popular stock in this table. On the other hand Plug Power, Inc. (NASDAQ:PLUG) is the least popular one with only 9 bullish hedge fund positions. Compared to these stocks Winmark Corporation (NASDAQ:WINA) is even less popular than PLUG. Hedge funds dodged a bullet by taking a bearish stance towards WINA. Our calculations showed that the top 20 most popular hedge fund stocks returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately WINA wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); WINA investors were disappointed as the stock returned 0.5% 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 70 percent of these stocks already outperformed the market so far in Q4.
Disclosure: None. This article was originally published at Insider Monkey.
