World-class money managers like Ken Griffin and Barry Rosenstein only invest their wealthy clients’ money after undertaking a rigorous examination of any potential stock. They are particularly successful in this regard when it comes to small-cap stocks, which their peerless research gives them a big information advantage on when it comes to judging their worth. It’s not surprising then that they generate their biggest returns from these stocks and invest more of their money in these stocks on average than other investors. It’s also not surprising then that we pay close attention to these picks ourselves and have built a market-beating investment strategy around them.
Is Wipro Limited (NYSE:WIT) undervalued? The smart money is getting more optimistic. The number of long hedge fund positions increased by 3 in recent months. Our calculations also showed that WIT isn’t among the 30 most popular stocks among hedge funds. WIT was in 14 hedge funds’ portfolios at the end of June. There were 11 hedge funds in our database with WIT holdings at the end of the previous quarter.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
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’ 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 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 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.
Unlike some fund managers who are betting on Dow reaching 40000 in a year, our long-short investment strategy doesn’t rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. Let’s analyze the key hedge fund action regarding Wipro Limited (NYSE:WIT).
What have hedge funds been doing with Wipro Limited (NYSE:WIT)?
At the end of the second quarter, a total of 14 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 27% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards WIT over the last 16 quarters. With the smart money’s positions undergoing their usual ebb and flow, there exists a few notable hedge fund managers who were increasing their holdings considerably (or already accumulated large positions).
Among these funds, AQR Capital Management held the most valuable stake in Wipro Limited (NYSE:WIT), which was worth $35.4 million at the end of the second quarter. On the second spot was Segantii Capital which amassed $34.2 million worth of shares. Moreover, Fisher Asset Management, LMR Partners, and Renaissance Technologies were also bullish on Wipro Limited (NYSE:WIT), allocating a large percentage of their portfolios to this stock.
As industrywide interest jumped, some big names have jumped into Wipro Limited (NYSE:WIT) headfirst. Citadel Investment Group, managed by Ken Griffin, initiated the most outsized position in Wipro Limited (NYSE:WIT). Citadel Investment Group had $1.5 million invested in the company at the end of the quarter. Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital also initiated a $0.6 million position during the quarter. The other funds with new positions in the stock are Dmitry Balyasny’s Balyasny Asset Management and Michael Gelband’s ExodusPoint Capital.
Let’s now take a look at hedge fund activity in other stocks similar to Wipro Limited (NYSE:WIT). These stocks are Brown-Forman Corporation (NYSE:BF), First Data Corporation (NYSE:FDC), SBA Communications Corporation (NASDAQ:SBAC), and TransDigm Group Incorporated (NYSE:TDG). This group of stocks’ market valuations are similar to WIT’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| BF | 28 | 698333 | 4 |
| FDC | 56 | 3664439 | -1 |
| SBAC | 31 | 1594237 | 2 |
| TDG | 48 | 5078289 | -4 |
| Average | 40.75 | 2758825 | 0.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 40.75 hedge funds with bullish positions and the average amount invested in these stocks was $2759 million. That figure was $145 million in WIT’s case. First Data Corporation (NYSE:FDC) is the most popular stock in this table. On the other hand Brown-Forman Corporation (NYSE:BF) is the least popular one with only 28 bullish hedge fund positions. Compared to these stocks Wipro Limited (NYSE:WIT) is even less popular than BF. Hedge funds dodged a bullet by taking a bearish stance towards WIT. Our calculations showed that the top 20 most popular hedge fund stocks returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Unfortunately WIT wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); WIT investors were disappointed as the stock returned -15.7% during the third quarter 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 in 2019.
Disclosure: None. This article was originally published at Insider Monkey.
