Last year we predicted the arrival of the first US recession since 2009 and we told in advance that the market will decline by at least 20% in (Recession is Imminent: We Need A Travel Ban NOW). In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. In this article, we will take a closer look at hedge fund sentiment towards Wayfair Inc (NYSE:W).
Is Wayfair a good stock to buy now? Wayfair Inc (NYSE:W) investors should be aware of a decrease in activity from the world’s largest hedge funds recently. Wayfair Inc (NYSE:W) was in 31 hedge funds’ portfolios at the end of September. The all time high for this statistic is 41. Our calculations also showed that W isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings).
Alex Sacerdote of Whale Rock Capital Management
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. Keeping this in mind let’s review the latest hedge fund action surrounding Wayfair Inc (NYSE:W).
Do Hedge Funds Think W Is A Good Stock To Buy Now?
Heading into the fourth quarter of 2021, a total of 31 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -11% from the previous quarter. On the other hand, there were a total of 40 hedge funds with a bullish position in W a year ago. With hedgies’ capital changing hands, there exists a select group of key hedge fund managers who were adding to their stakes substantially (or already accumulated large positions).
Among these funds, Spruce House Investment Management held the most valuable stake in Wayfair Inc (NYSE:W), which was worth $1226.4 million at the end of the third quarter. On the second spot was Bares Capital Management which amassed $695.8 million worth of shares. Whale Rock Capital Management, Citadel Investment Group, and Nantahala Capital 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 Spruce House Investment Management allocated the biggest weight to Wayfair Inc (NYSE:W), around 31.77% of its 13F portfolio. Bares Capital Management is also relatively very bullish on the stock, earmarking 12.48 percent of its 13F equity portfolio to W.
Due to the fact that Wayfair Inc (NYSE:W) has witnessed a decline in interest from hedge fund managers, logic holds that there exists a select few hedgies who were dropping their full holdings by the end of the third quarter. It’s worth mentioning that Renaissance Technologies dumped the biggest stake of all the hedgies tracked by Insider Monkey, totaling close to $95.8 million in stock. John Overdeck and David Siegel’s fund, Two Sigma Advisors, also said goodbye to its stock, about $43.2 million worth. These bearish behaviors are interesting, as aggregate hedge fund interest was cut by 4 funds by the end of the third quarter.
Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Wayfair Inc (NYSE:W) but similarly valued. These stocks are Carnival Corporation & plc (NYSE:CUK), Arista Networks Inc (NYSE:ANET), Etsy Inc (NASDAQ:ETSY), V.F. Corporation (NYSE:VFC), Deutsche Bank AG (NYSE:DB), Peloton Interactive, Inc. (NASDAQ:PTON), and Best Buy Co., Inc. (NYSE:BBY). This group of stocks’ market values match W’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| CUK | 9 | 239633 | -1 |
| ANET | 32 | 487538 | -3 |
| ETSY | 47 | 1435748 | 0 |
| VFC | 23 | 284894 | -9 |
| DB | 15 | 1795111 | -5 |
| PTON | 62 | 4634220 | -5 |
| BBY | 29 | 679878 | 2 |
| Average | 31 | 1365289 | -3 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 31 hedge funds with bullish positions and the average amount invested in these stocks was $1365 million. That figure was $3246 million in W’s case. Peloton Interactive, Inc. (NASDAQ:PTON) is the most popular stock in this table. On the other hand Carnival Corporation & plc (NYSE:CUK) is the least popular one with only 9 bullish hedge fund positions. Wayfair Inc (NYSE:W) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for W is 44.4. 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. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. 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 28.6% in 2021 through November 30th and surpassed the market again by 5.6 percentage points. Unfortunately W wasn’t nearly as popular as these 5 stocks (hedge fund sentiment was quite bearish); W investors were disappointed as the stock returned -3% since the end of September (through 11/30) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2021.
Follow Wayfair Inc. (NYSE:W)
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Disclosure: None. This article was originally published at Insider Monkey.
