Here is What Hedge Funds Think About Wrap Technologies, Inc. (WRAP)

In this article you are going to find out whether hedge funds think Wrap Technologies, Inc. (NASDAQ:WRAP) is a good investment right now. We like to check what the smart money thinks first before doing extensive research on a given stock. Although there have been several high profile failed hedge fund picks, the consensus picks among hedge fund investors have historically outperformed the market after adjusting for known risk attributes. It’s not surprising given that hedge funds have access to better information and more resources to predict the winners in the stock market.

Hedge fund interest in Wrap Technologies, Inc. (NASDAQ:WRAP) shares was flat at the end of last quarter. This is usually a negative indicator. Our calculations also showed that WRAP isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings). At the end of this article we will also compare WRAP to other stocks including International Tower Hill Mines Ltd (NYSE:THM), Savara, Inc. (NASDAQ:SVRA), and Equillium, Inc. (NASDAQ:EQ) to get a better sense of its popularity.

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 115 percentage points since March 2017 (see the details here). We have been able to outperform the passive index funds by tracking the moves of corporate insiders and hedge funds, and we believe small investors can benefit a lot from reading hedge fund investor letters and 13F filings.

Donald Sussman of Paloma Partners

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, an activist hedge fund wants to buy this $28 biotech stock for $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 check out the recent hedge fund action encompassing Wrap Technologies, Inc. (NASDAQ:WRAP).

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

At the end of March, a total of 4 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 0% from one quarter earlier. On the other hand, there were a total of 2 hedge funds with a bullish position in WRAP a year ago. With hedge funds’ positions undergoing their usual ebb and flow, there exists a few noteworthy hedge fund managers who were boosting their stakes substantially (or already accumulated large positions).

Of the funds tracked by Insider Monkey, Kamunting Street Capital, managed by Allan Teh, holds the biggest position in Wrap Technologies, Inc. (NASDAQ:WRAP). Kamunting Street Capital has a $1.7 million position in the stock, comprising 0.7% of its 13F portfolio. Coming in second is Ken Griffin of Citadel Investment Group, with a $0.9 million call position; less than 0.1%% of its 13F portfolio is allocated to the company. Remaining members of the smart money that hold long positions contain Daniel S. Och’s OZ Management, Ken Griffin’s Citadel Investment Group and Allan Teh’s Kamunting Street Capital. In terms of the portfolio weights assigned to each position 0 allocated the biggest weight to Wrap Technologies, Inc. (NASDAQ:WRAP), around 0.66% of its 13F portfolio. 0 is also relatively very bullish on the stock, setting aside 0.11 percent of its 13F equity portfolio to WRAP.

Since Wrap Technologies, Inc. (NASDAQ:WRAP) has faced declining sentiment from the aggregate hedge fund industry, we can see that there lies a certain “tier” of hedgies that elected to cut their positions entirely last quarter. Intriguingly, Israel Englander’s Millennium Management cut the largest investment of the “upper crust” of funds monitored by Insider Monkey, totaling about $0.5 million in stock, and Donald Sussman’s Paloma Partners was right behind this move, as the fund sold off about $0.1 million worth. These moves are interesting, as total hedge fund interest stayed the same (this is a bearish signal in our experience).

Let’s now review hedge fund activity in other stocks similar to Wrap Technologies, Inc. (NASDAQ:WRAP). We will take a look at International Tower Hill Mines Ltd (NYSE:THM), Savara, Inc. (NASDAQ:SVRA), Equillium, Inc. (NASDAQ:EQ), Identiv, Inc. (NASDAQ:INVE), Silvercrest Asset Management Group Inc (NASDAQ:SAMG), Medicenna Therapeutics Corp. (NASDAQ:MDNA), and PLx Pharma Inc. (NASDAQ:PLXP). This group of stocks’ market values resemble WRAP’s market value.

View table here if you experience formatting issues.

As you can see these stocks had an average of 6.6 hedge funds with bullish positions and the average amount invested in these stocks was $35 million. That figure was $3 million in WRAP’s case. Savara, Inc. (NASDAQ:SVRA) is the most popular stock in this table. On the other hand International Tower Hill Mines Ltd (NYSE:THM) is the least popular one with only 4 bullish hedge fund positions. Compared to these stocks Wrap Technologies, Inc. (NASDAQ:WRAP) is even less popular than THM. Our overall hedge fund sentiment score for WRAP is 22.1. 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. Hedge funds clearly dropped the ball on WRAP as the stock delivered strong returns, though hedge funds’ consensus picks still generated respectable returns. 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 17.2% in 2021 through June 11th and still beat the market by 3.3 percentage points. A small number of hedge funds were also right about betting on WRAP as the stock returned 53.4% since Q1 (through June 11th) and outperformed the market by an even larger margin.

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

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