Is Weight Watchers International, Inc. (WTW) A Good Stock To Buy?

It was a rough third quarter for many hedge funds, which were naturally unable to overcome the big dip in the broad market, as the S&P 500 fell by about 7% during the quarter. The Russell 2000, composed of smaller companies, performed even worse, trailing the S&P by about 14 percentage points between June 25 and October 30, as investors fled less-known quantities for safe havens. This was the case with hedge funds, who we heard were pulling money from the market amid the volatility, which included money from small-cap stocks, which they invest in at a higher rate than other investors. This action contributed to the greater decline in these stocks during the tumultuous period. We will study how this market volatility affected their sentiment towards Weight Watchers International, Inc. (NYSE:WTW) during the quarter below.

Is Weight Watchers International, Inc. (NYSE:WTW) undervalued? Money managers are taking an optimistic view. The number of long hedge fund bets moved up by 5 recently. Weight Watchers International, Inc. (NYSE:WTW) was in 14 hedge funds’ portfolios at the end of September. There were 9 hedge funds in our database with Weight Watchers International, Inc. (NYSE:WTW) holdings at the end of the previous quarter. The stock market shared a similar optimism with the shares of the company growing 31.55% during the quarter.

In order to find out more about the hedge fund sentiment, we will also compare Weight Watchers International, Inc. (NYSE:WTW) to other stocks, including Fifth Street Asset Management Inc (NASDAQ:FSAM), Columbus McKinnon Corp. (NASDAQ:CMCO), and TubeMogul Inc (NASDAQ:TUBE) to get a better sense of its popularity.

To the average investor, there are many signals stock market investors employ to grade their holdings. A couple of the most under-the-radar signals are hedge fund and insider trading signals. Our researchers have shown that, historically, those who follow the best picks of the top money managers can trounce the broader indices by a superb margin (see the details here).

Now, we’re going to check out the latest action encompassing Weight Watchers International, Inc. (NYSE:WTW).

Hedge fund activity in Weight Watchers International, Inc. (NYSE:WTW)

At the end of the third quarter, a total of 14 of the hedge funds tracked by Insider Monkey held long positions in this stock, an increase of 56% from the second quarter. With hedge funds’ capital changing hands, there exists an “upper tier” of key hedge fund managers who were boosting their stakes substantially (or already accumulated large positions).

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Jason Karp’s Tourbillon Capital Partners has the number one call position in Weight Watchers International, Inc. (NYSE:WTW), worth close to $6.4 million, comprising 0.2% of its total 13F portfolio. The second most bullish fund manager is Point72 Asset Management, managed by Steve Cohen, which holds a $5.2 million position; the fund has less than 0.1% of its 13F portfolio invested in the stock. Other professional money managers with similar optimism consist of Philip Rosenstrach’s Pomelo Capital, Scott McLellan’s Marble Arch Investments, and Daniel S. Och’s OZ Management.

Consequently, key money managers were leading the bulls’ herd. Marble Arch Investments also initiated a $3.7 million position during the quarter. The other funds with brand new Weight Watchers International, Inc. (NYSE:WTW) positions are Glenn Russell Dubin’s Highbridge Capital Management, Chao Ku’s Nine Chapters Capital Management, and Paul Tudor Jones’ Tudor Investment Corp.

Let’s now review hedge fund activity in other stocks similar to Weight Watchers International, Inc. (NYSE:WTW). We will take a look at Fifth Street Asset Management Inc (NASDAQ:FSAM), Columbus McKinnon Corp. (NASDAQ:CMCO), TubeMogul Inc (NASDAQ:TUBE), and Ascent Capital Group Inc (NASDAQ:ASCMA). This group of stocks’ market valuations are similar to Weight Watchers International, Inc. (NYSE:WTW)’s market valuation.

As you can see, these stocks had an average of 11 hedge funds with bullish positions and the average amount invested in these stocks was $56 million. That figure was $26 million in Weight Watchers International, Inc. (NYSE:WTW)’s case. Columbus McKinnon Corp. (NASDAQ:CMCO) is the most popular stock in this table. On the other hand, Fifth Street Asset Management Inc (NASDAQ:FSAM) is the least popular one with only 6 bullish hedge fund positions. Weight Watchers International, Inc. (NYSE:WTW) is not the most popular stock in this group, but hedge fund interest is still above average. This is a slightly positive signal, but we’d rather spend our time researching stocks that hedge funds are piling on. In this regard, Columbus McKinnon Corp. (NASDAQ:CMCO) might be a better candidate to consider a long position.