We know that hedge funds generate strong, risk-adjusted returns over the long run, which is why imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, professional investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn’t mean that they don’t have occasional colossal losses; they do. However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, let’s examine the smart money sentiment towards The Wendy’s Company (NASDAQ:WEN) and determine whether hedge funds skillfully traded this stock.
The Wendy’s Company (NASDAQ:WEN) has experienced an increase in enthusiasm from smart money lately. The Wendy’s Company (NASDAQ:WEN) was in 33 hedge funds’ portfolios at the end of September. The all time high for this statistic is 37. There were 30 hedge funds in our database with WEN positions at the end of the second quarter. Our calculations also showed that WEN isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings).
John Overdeck of Two Sigma Advisors
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium prices have more than doubled over the past year, so we go through lists like the 10 best EV 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. Now let’s go over the fresh hedge fund action encompassing The Wendy’s Company (NASDAQ:WEN).
Do Hedge Funds Think WEN Is A Good Stock To Buy Now?
At Q3’s end, a total of 33 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 10% from one quarter earlier. By comparison, 27 hedge funds held shares or bullish call options in WEN a year ago. With hedgies’ sentiment swirling, there exists a few noteworthy hedge fund managers who were upping their stakes significantly (or already accumulated large positions).
More specifically, Trian Partners was the largest shareholder of The Wendy’s Company (NASDAQ:WEN), with a stake worth $549.2 million reported as of the end of September. Trailing Trian Partners was Arrowstreet Capital, which amassed a stake valued at $79.7 million. Citadel Investment Group, Two Sigma Advisors, and Horizon Asset Management 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 Trian Partners allocated the biggest weight to The Wendy’s Company (NASDAQ:WEN), around 6.83% of its 13F portfolio. Franklin Street Capital is also relatively very bullish on the stock, earmarking 1.03 percent of its 13F equity portfolio to WEN.
As industrywide interest jumped, some big names have jumped into The Wendy’s Company (NASDAQ:WEN) headfirst. Point72 Asset Management, managed by Steve Cohen, assembled the most valuable position in The Wendy’s Company (NASDAQ:WEN). Point72 Asset Management had $11.7 million invested in the company at the end of the quarter. Jack Woodruff’s Candlestick Capital Management also made a $7.9 million investment in the stock during the quarter. The other funds with brand new WEN positions are Richard SchimeláandáLawrence Sapanski’s Cinctive Capital Management, Jinghua Yan’s TwinBeech Capital, and Graham F. Smith’s Franklin Street Capital.
Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as The Wendy’s Company (NASDAQ:WEN) but similarly valued. We will take a look at C3.ai, Inc. (NYSE:AI), Sterling Bancorp (NYSE:STL), The Chemours Company (NYSE:CC), National Fuel Gas Company (NYSE:NFG), Adaptive Biotechnologies Corporation (NASDAQ:ADPT), Dada Nexus Limited (NASDAQ:DADA), and Blackstone Mortgage Trust Inc (NYSE:BXMT). This group of stocks’ market values are similar to WEN’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| AI | 24 | 199056 | -5 |
| STL | 17 | 252247 | 1 |
| CC | 38 | 548945 | 14 |
| NFG | 19 | 152900 | 7 |
| ADPT | 25 | 1775850 | -2 |
| DADA | 13 | 106594 | -5 |
| BXMT | 15 | 182001 | 3 |
| Average | 21.6 | 459656 | 1.9 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 21.6 hedge funds with bullish positions and the average amount invested in these stocks was $460 million. That figure was $950 million in WEN’s case. The Chemours Company (NYSE:CC) is the most popular stock in this table. On the other hand Dada Nexus Limited (NASDAQ:DADA) is the least popular one with only 13 bullish hedge fund positions. The Wendy’s Company (NASDAQ:WEN) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for WEN is 74.8. 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 29.6% in 2021 and still beat the market by 3.6 percentage points. Hedge funds were also right about betting on WEN as the stock returned 6.8% since the end of Q3 (through 1/31) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
Follow Wendy's Co (NASDAQ:WEN)
Follow Wendy's Co (NASDAQ:WEN)
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Disclosure: None. This article was originally published at Insider Monkey.
