Concerns over rising interest rates and expected further rate increases have hit several stocks hard since the end of the third quarter. NASDAQ and Russell 2000 indices are already in correction territory. More importantly, Russell 2000 ETF (IWM) underperformed the larger S&P 500 ETF (SPY) by about 4 percentage points in the first half of the fourth quarter. Hedge funds and institutional investors tracked by Insider Monkey usually invest a disproportionate amount of their portfolios in smaller cap stocks. We have been receiving indications that hedge funds were paring back their overall exposure and this is one of the factors behind the recent movements in major indices. In this article, we will take a closer look at hedge fund sentiment towards John Wiley & Sons Inc (NYSE:JW).
John Wiley & Sons Inc (NYSE:JW) shareholders have witnessed a decrease in support from the world’s most elite money managers of late. JW was in 15 hedge funds’ portfolios at the end of the third quarter of 2018. There were 22 hedge funds in our database with JW holdings at the end of the previous quarter. Our calculations also showed that JW isn’t among the 30 most popular stocks among hedge funds.
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 6.3% year to date (through December 3rd) and outperformed the market even though it draws its stock picks among small-cap stocks. This strategy also outperformed the market by 18 percentage points since its inception (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
Let’s take a look at the new hedge fund action surrounding John Wiley & Sons Inc (NYSE:JW).
What have hedge funds been doing with John Wiley & Sons Inc (NYSE:JW)?
At Q3’s end, a total of 15 of the hedge funds tracked by Insider Monkey were long this stock, a change of -32% from the second quarter of 2018. On the other hand, there were a total of 11 hedge funds with a bullish position in JW at the beginning of this year. With hedgies’ positions undergoing their usual ebb and flow, there exists an “upper tier” of key hedge fund managers who were increasing their stakes considerably (or already accumulated large positions).
More specifically, AQR Capital Management was the largest shareholder of John Wiley & Sons Inc (NYSE:JW), with a stake worth $75.2 million reported as of the end of September. Trailing AQR Capital Management was Millennium Management, which amassed a stake valued at $17 million. GLG Partners, Citadel Investment Group, and Renaissance Technologies were also very fond of the stock, giving the stock large weights in their portfolios.
Because John Wiley & Sons Inc (NYSE:JW) has witnessed declining sentiment from hedge fund managers, we can see that there were a few hedgies that slashed their positions entirely in the third quarter. Intriguingly, Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital dropped the biggest investment of the “upper crust” of funds monitored by Insider Monkey, worth close to $14.5 million in stock. Joel Greenblatt’s fund, Gotham Asset Management, also said goodbye to its stock, about $1.8 million worth. These bearish behaviors are interesting, as aggregate hedge fund interest was cut by 7 funds in the third quarter.
Let’s now take a look at hedge fund activity in other stocks similar to John Wiley & Sons Inc (NYSE:JW). We will take a look at Alteryx, Inc. (NYSE:AYX), RLI Corp. (NYSE:RLI), Sprouts Farmers Market Inc (NASDAQ:SFM), and American National Insurance Company (NASDAQ:ANAT). This group of stocks’ market caps resemble JW’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| AYX | 26 | 681553 | 8 |
| RLI | 11 | 163038 | 1 |
| SFM | 19 | 298608 | 3 |
| ANAT | 13 | 40807 | 1 |
| Average | 17.25 | 296002 | 3.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 17.25 hedge funds with bullish positions and the average amount invested in these stocks was $296 million. That figure was $139 million in JW’s case. Alteryx, Inc. (NYSE:AYX) is the most popular stock in this table. On the other hand RLI Corp. (NYSE:RLI) is the least popular one with only 11 bullish hedge fund positions. John Wiley & Sons Inc (NYSE:JW) 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. In this regard AYX might be a better candidate to consider a long position.
Disclosure: None. This article was originally published at Insider Monkey.
