Hedge funds run by legendary names like George Soros and David Tepper make billions of dollars a year for themselves and their super-rich accredited investors (you’ve got to have a minimum of $1 million liquid to invest in a hedge fund) by spending enormous resources on analyzing and uncovering data about small-cap stocks that the big brokerage houses don’t follow. Small caps are where they can generate significant outperformance. That’s why we pay special attention to hedge fund activity in these stocks.
Weibo Corp (NASDAQ:WB) was in 13 hedge funds’ portfolios at the end of March. WB shareholders have witnessed a decrease in hedge fund interest in recent months. There were 17 hedge funds in our database with WB positions at the end of the previous quarter. Our calculations also showed that WB isn’t among the 30 most popular stocks among hedge funds.
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’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the market by 40 percentage points since May 2014 through May 30, 2019 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.
Let’s review the new hedge fund action surrounding Weibo Corp (NASDAQ:WB).
What have hedge funds been doing with Weibo Corp (NASDAQ:WB)?
At the end of the first quarter, a total of 13 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -24% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards WB over the last 15 quarters. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Weibo Corp (NASDAQ:WB) was held by Platinum Asset Management, which reported holding $171.6 million worth of stock at the end of March. It was followed by Fisher Asset Management with a $161.5 million position. Other investors bullish on the company included Citadel Investment Group, Renaissance Technologies, and Oaktree Capital Management.
Due to the fact that Weibo Corp (NASDAQ:WB) has faced falling interest from the aggregate hedge fund industry, it’s safe to say that there exists a select few hedge funds that slashed their full holdings by the end of the third quarter. Intriguingly, Yi Xin’s Ariose Capital cut the largest stake of all the hedgies monitored by Insider Monkey, comprising an estimated $4.6 million in stock, and Deepak Gulati’s Argentiere Capital was right behind this move, as the fund cut about $2.9 million worth. These transactions are interesting, as aggregate hedge fund interest dropped by 4 funds by the end of the third quarter.
Let’s now review hedge fund activity in other stocks similar to Weibo Corp (NASDAQ:WB). These stocks are MGM Resorts International (NYSE:MGM), International Flavors & Fragrances Inc (NYSE:IFF), Marathon Oil Corporation (NYSE:MRO), and Rollins, Inc. (NYSE:ROL). This group of stocks’ market valuations are closest to WB’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| MGM | 45 | 1756675 | -1 |
| IFF | 16 | 188308 | -5 |
| MRO | 37 | 732698 | 0 |
| ROL | 20 | 286732 | -2 |
| Average | 29.5 | 741103 | -2 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 29.5 hedge funds with bullish positions and the average amount invested in these stocks was $741 million. That figure was $449 million in WB’s case. MGM Resorts International (NYSE:MGM) is the most popular stock in this table. On the other hand International Flavors & Fragrances Inc (NYSE:IFF) is the least popular one with only 16 bullish hedge fund positions. Compared to these stocks Weibo Corp (NASDAQ:WB) is even less popular than IFF. Hedge funds dodged a bullet by taking a bearish stance towards WB. Our calculations showed that the top 20 most popular hedge fund stocks returned 6.2% in Q2 through June 19th and outperformed the S&P 500 ETF (SPY) by nearly 3 percentage points. Unfortunately WB wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); WB investors were disappointed as the stock returned -31.9% during the same time frame and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as 13 of these stocks already outperformed the market so far in the second quarter.
Disclosure: None. This article was originally published at Insider Monkey.
