Investing in small cap stocks has historically been a way to outperform the market, as small cap companies typically grow faster on average than the blue chips. That outperformance comes with a price, however, as there are occasional periods of higher volatility. The fourth quarter of 2018 is one of those periods, as the Russell 2000 ETF (IWM) has underperformed the larger S&P 500 ETF (SPY) by nearly 7 percentage points. Given that the funds we track tend to have a disproportionate amount of their portfolios in smaller cap stocks, they have seen some volatility in their portfolios too. Actually their moves are potentially one of the factors that contributed to this volatility. In this article, we use our extensive database of hedge fund holdings to find out what the smart money thinks of WideOpenWest, Inc. (NYSE:WOW).
Is WideOpenWest, Inc. (NYSE:WOW) the right pick for your portfolio? The best stock pickers are becoming more confident. The number of long hedge fund positions rose by 2 in recent months. Our calculations also showed that WOW isn’t among the 30 most popular stocks among hedge funds.
According to most investors, hedge funds are seen as worthless, outdated investment tools of yesteryear. While there are over 8000 funds in operation today, We hone in on the moguls of this group, around 750 funds. It is estimated that this group of investors preside over most of the hedge fund industry’s total asset base, and by paying attention to their highest performing investments, Insider Monkey has unearthed several investment strategies that have historically exceeded the S&P 500 index. Insider Monkey’s flagship hedge fund strategy exceeded the S&P 500 index by nearly 5 percentage points a year since its inception in May 2014 through early November 2018. We were able to generate large returns even by identifying short candidates. Our portfolio of short stocks lost 27.5% since February 2017 (through March 12th) even though the market was up nearly 25% during the same period. We just shared a list of 6 short targets in our latest quarterly update and they are already down an average of 6% in less than a month.
Let’s take a look at the new hedge fund action encompassing WideOpenWest, Inc. (NYSE:WOW).
What does the smart money think about WideOpenWest, Inc. (NYSE:WOW)?
Heading into the first quarter of 2019, a total of 13 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 18% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards WOW over the last 14 quarters. With hedge funds’ capital changing hands, there exists a few key hedge fund managers who were adding to their holdings considerably (or already accumulated large positions).
Among these funds, Indaba Capital Management held the most valuable stake in WideOpenWest, Inc. (NYSE:WOW), which was worth $10.6 million at the end of the fourth quarter. On the second spot was Archer Capital Management which amassed $4.5 million worth of shares. Moreover, Arrowstreet Capital, GAMCO Investors, and Millennium Management were also bullish on WideOpenWest, Inc. (NYSE:WOW), allocating a large percentage of their portfolios to this stock.
As industrywide interest jumped, key hedge funds were breaking ground themselves. Marshall Wace LLP, managed by Paul Marshall and Ian Wace, initiated the most outsized position in WideOpenWest, Inc. (NYSE:WOW). Marshall Wace LLP had $2.9 million invested in the company at the end of the quarter. D. E. Shaw’s D E Shaw also initiated a $2 million position during the quarter. The following funds were also among the new WOW investors: Andrew Feldstein and Stephen Siderow’s Blue Mountain Capital, Minhua Zhang’s Weld Capital Management, and Jeffrey Talpins’s Element Capital Management.
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as WideOpenWest, Inc. (NYSE:WOW) but similarly valued. These stocks are Himax Technologies, Inc. (NASDAQ:HIMX), NextDecade Corporation (NASDAQ:NEXT), Argan, Inc. (NYSEAMEX:AGX), and Peoples Bancorp Inc. (NASDAQ:PEBO). This group of stocks’ market valuations match WOW’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| HIMX | 9 | 28168 | -1 |
| NEXT | 8 | 452258 | 2 |
| AGX | 13 | 85300 | -4 |
| PEBO | 8 | 26504 | -2 |
| Average | 9.5 | 148058 | -1.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 9.5 hedge funds with bullish positions and the average amount invested in these stocks was $148 million. That figure was $35 million in WOW’s case. Argan, Inc. (NYSEAMEX:AGX) is the most popular stock in this table. On the other hand NextDecade Corporation (NASDAQ:NEXT) is the least popular one with only 8 bullish hedge fund positions. WideOpenWest, Inc. (NYSE:WOW) is not the most popular stock in this group but hedge fund interest is still above average. Our calculations showed that top 15 most popular stocks) among hedge funds returned 24.2% through April 22nd and outperformed the S&P 500 ETF (SPY) by more than 7 percentage points. Hedge funds were also right about betting on WOW as the stock returned 26.9% and outperformed the market by an even larger margin. Hedge funds were rewarded for their relative bullishness.
Disclosure: None. This article was originally published at Insider Monkey.
