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 Wolverine World Wide, Inc. (NYSE:WWW) 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.
Wolverine World Wide, Inc. (NYSE:WWW) was in 23 hedge funds’ portfolios at the end of the fourth quarter of 2019. WWW has seen an increase in hedge fund interest lately. There were 21 hedge funds in our database with WWW holdings at the end of the previous quarter. Our calculations also showed that WWW 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.
Joel Greenblatt of Gotham Asset 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. With all of this in mind we’re going to take a gander at the key hedge fund action surrounding Wolverine World Wide, Inc. (NYSE:WWW).
What have hedge funds been doing with Wolverine World Wide, Inc. (NYSE:WWW)?
At the end of the fourth quarter, a total of 23 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 10% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in WWW over the last 18 quarters. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Millennium Management held the most valuable stake in Wolverine World Wide, Inc. (NYSE:WWW), which was worth $29.4 million at the end of the third quarter. On the second spot was Royce & Associates which amassed $15.1 million worth of shares. Ancora Advisors, Diamond Hill Capital, and Marshall Wace LLP 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 Ancora Advisors allocated the biggest weight to Wolverine World Wide, Inc. (NYSE:WWW), around 0.49% of its 13F portfolio. Quantinno Capital is also relatively very bullish on the stock, dishing out 0.2 percent of its 13F equity portfolio to WWW.
As aggregate interest increased, key hedge funds have jumped into Wolverine World Wide, Inc. (NYSE:WWW) headfirst. Arrowstreet Capital, managed by Peter Rathjens, Bruce Clarke and John Campbell, initiated the largest position in Wolverine World Wide, Inc. (NYSE:WWW). Arrowstreet Capital had $4.3 million invested in the company at the end of the quarter. Joel Greenblatt’s Gotham Asset Management also made a $1 million investment in the stock during the quarter. The other funds with brand new WWW positions are Schonfeld Strategic Advisors, Hoon Kim’s Quantinno Capital, and Ran Pang’s Quantamental Technologies.
Let’s also examine hedge fund activity in other stocks similar to Wolverine World Wide, Inc. (NYSE:WWW). These stocks are TreeHouse Foods Inc. (NYSE:THS), American Equity Investment Life Holding (NYSE:AEL), Extended Stay America Inc (NASDAQ:STAY), and Urban Outfitters, Inc. (NASDAQ:URBN). This group of stocks’ market valuations resemble WWW’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| THS | 27 | 237953 | 8 |
| AEL | 17 | 89434 | -2 |
| STAY | 35 | 496027 | 8 |
| URBN | 34 | 170783 | 0 |
| Average | 28.25 | 248549 | 3.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 28.25 hedge funds with bullish positions and the average amount invested in these stocks was $249 million. That figure was $120 million in WWW’s case. Extended Stay America Inc (NASDAQ:STAY) is the most popular stock in this table. On the other hand American Equity Investment Life Holding (NYSE:AEL) is the least popular one with only 17 bullish hedge fund positions. Wolverine World Wide, Inc. (NYSE:WWW) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and 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 WWW wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); WWW investors were disappointed as the stock returned -59.8% 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 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.
