At Insider Monkey we track the activity of some of the best-performing hedge funds like Appaloosa Management, Baupost, and Third Point because we determined that some of the stocks that they are collectively bullish on can help us generate returns above the broader indices. Out of thousands of stocks that hedge funds invest in, small-caps can provide the best returns over the long term due to the fact that these companies are less efficiently priced and are usually under the radars of mass-media, analysts and dumb money. This is why we follow the smart money moves in the small-cap space.
Is Wageworks Inc (NYSE:WAGE) a sound investment today? Prominent investors are altogether becoming less confident. The number of long hedge fund positions dropped by 1 recently. WAGE was in 10 hedge funds’ portfolios at the end of September. There were 11 hedge funds in our database with WAGE positions at the end of the previous quarter. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Manitowoc Foodservice Inc(NYSE:MFS), Darling International Inc. (NYSE:DAR), and J&J Snack Foods Corp. (NASDAQ:JJSF) to gather more data points.
At Insider Monkey, we’ve developed an investment strategy that has delivered market-beating returns over the past 12 months. Our strategy identifies the 100 best-performing funds of the previous quarter from among the collection of 700+ successful funds that we track in our database, which we accomplish using our returns methodology. We then study the portfolios of those 100 funds using the latest 13F data to uncover the 30 most popular mid-cap stocks (market caps of between $1 billion and $10 billion) among them to hold until the next filing period. This strategy delivered 18% gains over the past 12 months, more than doubling the 8% returns enjoyed by the S&P 500 ETFs.
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How have hedgies been trading Wageworks Inc (NYSE:WAGE)?
Heading into the fourth quarter of 2016, a total of 10 of the hedge funds tracked by Insider Monkey were long this stock, down by 9% from the second quarter of 2016. On the other hand, there were a total of 12 hedge funds with a bullish position in WAGE at the beginning of this year. With the smart money’s positions undergoing their usual ebb and flow, there exists an “upper tier” of notable hedge fund managers who were upping their holdings considerably (or already accumulated large positions).
When looking at the institutional investors followed by Insider Monkey, Renaissance Technologies, one of the largest hedge funds in the world, has the biggest position in Wageworks Inc (NYSE:WAGE), worth close to $33.9 million. On Renaissance Technologies’ heels is Matthew A. Weatherbie of Weatherbie Capital, with a $20.5 million position; the fund has 2.6% of its 13F portfolio invested in the stock. Other professional money managers that are bullish contain D. E. Shaw’s D E Shaw, Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital and Peter Muller’s PDT Partners. We should note that none of these hedge funds are among our list of the 100 best performing hedge funds which is based on the performance of their 13F long positions in non-microcap stocks.
Since Wageworks Inc (NYSE:WAGE) has sustained falling interest from hedge fund managers, logic holds that there exists a select few money managers who were dropping their entire stakes by the end of the third quarter. At the top of the heap, Richard S. Meisenberg’s ACK Asset Management cashed in the largest investment of the “upper crust” of funds studied by Insider Monkey, totaling an estimated $15 million in stock, and David Costen Haley’s HBK Investments was right behind this move, as the fund said goodbye to about $1.3 million worth of shares.
Let’s also examine hedge fund activity in other stocks similar to Wageworks Inc (NYSE:WAGE). These stocks are Manitowoc Foodservice Inc(NYSE:MFS), Darling International Inc. (NYSE:DAR), J&J Snack Foods Corp. (NASDAQ:JJSF), and Boyd Gaming Corporation (NYSE:BYD). All of these stocks’ market caps resemble WAGE’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| MFS | 20 | 716809 | 1 |
| DAR | 24 | 291374 | -6 |
| JJSF | 10 | 54617 | 1 |
| BYD | 23 | 667524 | -4 |
As you can see these stocks had an average of 19 hedge funds with bullish positions and the average amount invested in these stocks was $433 million. That figure was $84 million in WAGE’s case. Darling International Inc. (NYSE:DAR) is the most popular stock in this table. On the other hand J&J Snack Foods Corp. (NASDAQ:JJSF) is the least popular one with only 10 bullish hedge fund positions. Compared to these stocks Wageworks Inc (NYSE:WAGE) is even less popular than JJSF. Considering that hedge funds aren’t fond of this stock in relation to other companies analyzed in this article, it may be a good idea to analyze it in detail and understand why the smart money isn’t behind this stock. This isn’t necessarily bad news. Although it is possible that hedge funds may think the stock is overpriced and view the stock as a short candidate, they may not be very familiar with the bullish thesis. In either case more research is warranted.
Disclosure: None
