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. 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 835 13F filings submitted by hedge funds and prominent investors. These filings show these funds’ portfolio positions as of December 31st, 2019. What do these smart investors think about WNS (Holdings) Limited (NYSE:WNS)?
WNS (Holdings) Limited (NYSE:WNS) investors should be aware of an increase in support from the world’s most elite money managers lately. WNS was in 20 hedge funds’ portfolios at the end of December. There were 19 hedge funds in our database with WNS positions at the end of the previous quarter. Our calculations also showed that WNS 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).
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 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 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.
Israel Englander of Millennium Management
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. Keeping this in mind we’re going to analyze the latest hedge fund action regarding WNS (Holdings) Limited (NYSE:WNS).
How have hedgies been trading WNS (Holdings) Limited (NYSE:WNS)?
Heading into the first quarter of 2020, a total of 20 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 5% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards WNS over the last 18 quarters. With hedgies’ capital changing hands, there exists an “upper tier” of notable hedge fund managers who were boosting their stakes substantially (or already accumulated large positions).
According to Insider Monkey’s hedge fund database, Renaissance Technologies holds the number one position in WNS (Holdings) Limited (NYSE:WNS). Renaissance Technologies has a $91.6 million position in the stock, comprising 0.1% of its 13F portfolio. The second largest stake is held by Millennium Management, led by Israel Englander, holding a $27.3 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Other hedge funds and institutional investors that hold long positions contain Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital, Ken Fisher’s Fisher Asset Management and Ernest Chow and Jonathan Howe’s Sensato Capital Management. In terms of the portfolio weights assigned to each position Sensato Capital Management allocated the biggest weight to WNS (Holdings) Limited (NYSE:WNS), around 9.32% of its 13F portfolio. Dalton Investments is also relatively very bullish on the stock, setting aside 1.34 percent of its 13F equity portfolio to WNS.
As industrywide interest jumped, some big names were breaking ground themselves. Hudson Bay Capital Management, managed by Sander Gerber, created the largest position in WNS (Holdings) Limited (NYSE:WNS). Hudson Bay Capital Management had $1.8 million invested in the company at the end of the quarter. Donald Sussman’s Paloma Partners also initiated a $0.6 million position during the quarter. The following funds were also among the new WNS investors: D. E. Shaw’s D E Shaw, Michael Gelband’s ExodusPoint Capital, and Matthew Hulsizer’s PEAK6 Capital Management.
Let’s check out hedge fund activity in other stocks similar to WNS (Holdings) Limited (NYSE:WNS). We will take a look at Manchester United PLC (NYSE:MANU), Balchem Corporation (NASDAQ:BCPC), Investors Bancorp, Inc. (NASDAQ:ISBC), and SkyWest, Inc. (NASDAQ:SKYW). This group of stocks’ market values match WNS’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| MANU | 10 | 35986 | -2 |
| BCPC | 12 | 62978 | 3 |
| ISBC | 30 | 262465 | 2 |
| SKYW | 15 | 179258 | -1 |
| Average | 16.75 | 135172 | 0.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 16.75 hedge funds with bullish positions and the average amount invested in these stocks was $135 million. That figure was $228 million in WNS’s case. Investors Bancorp, Inc. (NASDAQ:ISBC) is the most popular stock in this table. On the other hand Manchester United PLC (NYSE:MANU) is the least popular one with only 10 bullish hedge fund positions. WNS (Holdings) Limited (NYSE:WNS) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. 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 but beat the market by 5.5 percentage points. Unfortunately WNS wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on WNS were disappointed as the stock returned -41.6% during the same time period 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 this year.
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.
