Here is What Hedge Funds Think About Washington Prime Group Inc. (WPG)

Out of thousands of stocks that are currently traded on the market, it is difficult to identify those that will really generate strong returns. Hedge funds and institutional investors spend millions of dollars on analysts with MBAs and PhDs, who are industry experts and well connected to other industry and media insiders on top of that. Individual investors can piggyback the hedge funds employing these talents and can benefit from their vast resources and knowledge in that way. We analyze quarterly 13F filings of nearly 900 hedge funds and, by looking at the smart money sentiment that surrounds a stock, we can determine whether it has the potential to beat the market over the long-term. Therefore, let’s take a closer look at what smart money thinks about Washington Prime Group Inc. (NYSE:WPG).

Is Washington Prime Group Inc. (NYSE:WPG) an attractive investment now? Money managers were becoming less confident. The number of long hedge fund bets dropped by 4 in recent months. Washington Prime Group Inc. (NYSE:WPG) was in 6 hedge funds’ portfolios at the end of the first quarter of 2021. The all time high for this statistic is 22. Our calculations also showed that WPG isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings).

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 S&P 500 ETFs by 115 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.

David Siegel of Two Sigma Advisors

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, an activist hedge fund owns nearly 40% of this $24 biotech stock and is trying to buy the rest for around $50. So, we recommended a long position to our monthly premium newsletter subscribers. We go through lists like the 10 best battery stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our homepage. With all of this in mind we’re going to take a look at the fresh hedge fund action encompassing Washington Prime Group Inc. (NYSE:WPG).

Do Hedge Funds Think WPG Is A Good Stock To Buy Now?

At the end of March, a total of 6 of the hedge funds tracked by Insider Monkey were long this stock, a change of -40% from the fourth quarter of 2020. Below, you can check out the change in hedge fund sentiment towards WPG over the last 23 quarters. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

More specifically, Citadel Investment Group was the largest shareholder of Washington Prime Group Inc. (NYSE:WPG), with a stake worth $0.4 million reported as of the end of March. Trailing Citadel Investment Group was HBK Investments, which amassed a stake valued at $0.2 million. Athanor Capital, Renaissance Technologies, and Two Sigma Advisors 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 0 allocated the biggest weight to Washington Prime Group Inc. (NYSE:WPG), around 0.07% of its 13F portfolio. 0 is also relatively very bullish on the stock, dishing out 0.0038 percent of its 13F equity portfolio to WPG.

Seeing as Washington Prime Group Inc. (NYSE:WPG) has experienced falling interest from the smart money, it’s easy to see that there exists a select few money managers who sold off their full holdings heading into Q2. At the top of the heap, Dmitry Balyasny’s Balyasny Asset Management dumped the biggest position of all the hedgies followed by Insider Monkey, totaling close to $2.8 million in stock, and Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital was right behind this move, as the fund dumped about $0.8 million worth. These moves are intriguing to say the least, as aggregate hedge fund interest fell by 4 funds heading into Q2.

Let’s now take a look at hedge fund activity in other stocks similar to Washington Prime Group Inc. (NYSE:WPG). We will take a look at Sunlands Technology Group (NYSE:STG), Applied DNA Sciences Inc (NASDAQ:APDN), Akers Biosciences Inc (NASDAQ:AKER), Kintara Therapeutics, Inc. (NASDAQ:KTRA), Sotherly Hotels Inc (NASDAQ:SOHO), ARCA biopharma, Inc. (NASDAQ:ABIO), and Profire Energy, Inc. (NASDAQ:PFIE). This group of stocks’ market valuations resemble WPG’s market valuation.

View table here if you experience formatting issues.

As you can see these stocks had an average of 2.6 hedge funds with bullish positions and the average amount invested in these stocks was $1 million. That figure was $1 million in WPG’s case. Profire Energy, Inc. (NASDAQ:PFIE) is the most popular stock in this table. On the other hand Applied DNA Sciences Inc (NASDAQ:APDN) is the least popular one with only 1 bullish hedge fund positions. Compared to these stocks Washington Prime Group Inc. (NYSE:WPG) is more popular among hedge funds. Our overall hedge fund sentiment score for WPG is 59.2. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 19.3% in 2021 through June 25th and still beat the market by 4.8 percentage points. Unfortunately WPG wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on WPG were disappointed as the stock returned 6.7% since the end of the first quarter (through 6/25) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as most of these stocks already outperformed the market since 2019.

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Disclosure: None. This article was originally published at Insider Monkey.