Is WDR Stock A Buy or Sell?

Many prominent investors, including Warren Buffett, David Tepper and Stan Druckenmiller, have been cautious regarding the current bull market and missed out as the stock market reached another high in recent weeks. On the other hand, technology hedge funds weren’t timid and registered double digit market beating gains. Financials, energy and industrial stocks initially suffered the most but many of these stocks delivered strong returns since November and hedge funds actually increased their positions in these stocks. In this article we will find out how hedge fund sentiment towards Waddell & Reed Financial, Inc. (NYSE:WDR) changed recently.

Is WDR stock a buy? Investors who are in the know were becoming hopeful. The number of long hedge fund bets advanced by 4 lately. Waddell & Reed Financial, Inc. (NYSE:WDR) was in 25 hedge funds’ portfolios at the end of the fourth quarter of 2020. The all time high for this statistic is 25. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that WDR isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings). There were 21 hedge funds in our database with WDR positions at the end of the third quarter.

In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s monthly stock picks returned 197% since March 2017 and outperformed the S&P 500 ETFs by more than 124 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

Donald Yacktman of Yacktman Asset Management

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, auto parts business is a recession resistant business, so we are taking a closer look at this discount auto parts stock that is growing at a 196% annualized rate. We go through lists like the 15 best micro-cap stocks to buy now to identify the next stock with 10x upside potential. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our website. Now let’s check out the recent hedge fund action surrounding Waddell & Reed Financial, Inc. (NYSE:WDR).

Do Hedge Funds Think WDR Is A Good Stock To Buy Now?

At the end of the fourth quarter, a total of 25 of the hedge funds tracked by Insider Monkey were long this stock, a change of 19% from the third quarter of 2020. Below, you can check out the change in hedge fund sentiment towards WDR over the last 22 quarters. With hedge funds’ positions undergoing their usual ebb and flow, there exists a select group of key hedge fund managers who were adding to their stakes meaningfully (or already accumulated large positions).

The largest stake in Waddell & Reed Financial, Inc. (NYSE:WDR) was held by Alpine Associates, which reported holding $39.9 million worth of stock at the end of December. It was followed by GAMCO Investors with a $31.8 million position. Other investors bullish on the company included Water Island Capital, Yacktman Asset Management, and Renaissance Technologies. In terms of the portfolio weights assigned to each position Alpine Associates allocated the biggest weight to Waddell & Reed Financial, Inc. (NYSE:WDR), around 1.63% of its 13F portfolio. Matarin Capital is also relatively very bullish on the stock, designating 1.22 percent of its 13F equity portfolio to WDR.

There weren’t any hedge funds initiating brand new positions in the stock during the fourth quarter.

Let’s now review hedge fund activity in other stocks similar to Waddell & Reed Financial, Inc. (NYSE:WDR). We will take a look at Plains GP Holdings LP (NASDAQ:PAGP), BrightView Holdings, Inc. (NYSE:BV), Paya Holdings Inc. (NASDAQ:PAYA), Kaman Corporation (NYSE:KAMN), Retail Opportunity Investments Corp (NASDAQ:ROIC), NuStar Energy L.P. (NYSE:NS), and Perficient, Inc. (NASDAQ:PRFT). All of these stocks’ market caps resemble WDR’s market cap.

View table here if you experience formatting issues.

As you can see these stocks had an average of 14.3 hedge funds with bullish positions and the average amount invested in these stocks was $122 million. That figure was $146 million in WDR’s case. Paya Holdings Inc. (NASDAQ:PAYA) is the most popular stock in this table. On the other hand NuStar Energy L.P. (NYSE:NS) is the least popular one with only 4 bullish hedge fund positions. Compared to these stocks Waddell & Reed Financial, Inc. (NYSE:WDR) is more popular among hedge funds. Our overall hedge fund sentiment score for WDR is 89. 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 30 most popular stocks among hedge funds returned 81.2% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 26 percentage points. These stocks gained 12.3% in 2021 through April 19th and still beat the market by 0.9 percentage points. Unfortunately WDR wasn’t nearly as popular as these 30 stocks and hedge funds that were betting on WDR were disappointed as the stock returned -0.1% since the end of the fourth quarter (through 4/19) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 30 most popular stocks among hedge funds as most of these stocks already outperformed the market since 2019.

Disclosure: None. This article was originally published at Insider Monkey.