Reputable billionaire investors such as Jim Simons, Cliff Asness and David Tepper generate exorbitant profits for their wealthy accredited investors (a minimum of $1 million in investable assets would be required to invest in a hedge fund and most successful hedge funds won’t accept your savings unless you commit at least $5 million) by pinpointing winning small-cap stocks. There is little or no publicly-available information at all on some of these small companies, which makes it hard for an individual investor to pin down a winner within the small-cap space. However, hedge funds and other big asset managers can do the due diligence and analysis for you instead, thanks to their highly-skilled research teams and vast resources to conduct an appropriate evaluation process. Looking for potential winners within the small-cap galaxy of stocks? We believe following the smart money is a good starting point.
Is Wingstop Inc (NASDAQ:WING) a buy here? The smart money is becoming more confident. The number of long hedge fund positions improved by 4 recently. Our calculations also showed that wing isn’t among the 30 most popular stocks among hedge funds. WING was in 21 hedge funds’ portfolios at the end of the fourth quarter of 2018. There were 17 hedge funds in our database with WING positions at the end of the previous quarter.
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’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the market by 32 percentage points since May 2014 through March 12, 2019 (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 27.5% through March 12, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
We’re going to take a gander at the new hedge fund action surrounding Wingstop Inc (NASDAQ:WING).
Hedge fund activity in Wingstop Inc (NASDAQ:WING)
At Q4’s end, a total of 21 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 24% from the second quarter of 2018. By comparison, 16 hedge funds held shares or bullish call options in WING a year ago. With the smart money’s positions undergoing their usual ebb and flow, there exists a select group of noteworthy hedge fund managers who were adding to their holdings meaningfully (or already accumulated large positions).
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Renaissance Technologies, managed by Jim Simons, holds the biggest position in Wingstop Inc (NASDAQ:WING). Renaissance Technologies has a $44.9 million position in the stock, comprising less than 0.1%% of its 13F portfolio. Sitting at the No. 2 spot is Ken Griffin of Citadel Investment Group, with a $21.3 million position; less than 0.1%% of its 13F portfolio is allocated to the stock. Other peers that hold long positions encompass Richard Driehaus’s Driehaus Capital, Israel Englander’s Millennium Management and Lee Ainslie’s Maverick Capital.
As one would reasonably expect, key money managers have jumped into Wingstop Inc (NASDAQ:WING) headfirst. Citadel Investment Group, managed by Ken Griffin, created the largest position in Wingstop Inc (NASDAQ:WING). Citadel Investment Group had $21.3 million invested in the company at the end of the quarter. Philippe Laffont’s Coatue Management also made a $0.7 million investment in the stock during the quarter. The other funds with brand new WING positions are Peter Algert and Kevin Coldiron’s Algert Coldiron Investors, Minhua Zhang’s Weld Capital Management, and Paul Marshall and Ian Wace’s Marshall Wace LLP.
Let’s go over hedge fund activity in other stocks similar to Wingstop Inc (NASDAQ:WING). We will take a look at First Bancorp (NYSE:FBP), Patterson Companies, Inc. (NASDAQ:PDCO), Itron, Inc. (NASDAQ:ITRI), and Union Bankshares Corporation (NASDAQ:UBSH). This group of stocks’ market valuations match WING’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| FBP | 20 | 192189 | 2 |
| PDCO | 28 | 215378 | -1 |
| ITRI | 14 | 449429 | -3 |
| UBSH | 6 | 24227 | 2 |
| Average | 17 | 220306 | 0 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 17 hedge funds with bullish positions and the average amount invested in these stocks was $220 million. That figure was $129 million in WING’s case. Patterson Companies, Inc. (NASDAQ:PDCO) is the most popular stock in this table. On the other hand Union Bankshares Corporation (NASDAQ:UBSH) is the least popular one with only 6 bullish hedge fund positions. Wingstop Inc (NASDAQ:WING) 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 WING, though not to the same extent, as the stock returned 20.2% and outperformed the market as well.
Disclosure: None. This article was originally published at Insider Monkey.
