In this article we are going to use hedge fund sentiment as a tool and determine whether Welbilt, Inc. (NYSE:WBT) is a good investment right now. We like to analyze hedge fund sentiment before conducting days of in-depth research. We do so because hedge funds and other elite investors have numerous Ivy League graduates, expert network advisers, and supply chain tipsters working or consulting for them. There is not a shortage of news stories covering failed hedge fund investments and it is a fact that hedge funds’ picks don’t beat the market 100% of the time, but their consensus picks have historically done very well and have outperformed the market after adjusting for risk.
Is WBT a good stock to buy? Welbilt, Inc. (NYSE:WBT) was in 38 hedge funds’ portfolios at the end of September. The all time high for this statistic is 44. WBT shareholders have witnessed a decrease in support from the world’s most elite money managers recently. There were 44 hedge funds in our database with WBT positions at the end of the second quarter. Our calculations also showed that WBT isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings).
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. Now we’re going to take a peek at the recent hedge fund action surrounding Welbilt, Inc. (NYSE:WBT).
David Harding of Winton Capital Management
Do Hedge Funds Think WBT Is A Good Stock To Buy Now?
At the end of September, a total of 38 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -14% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards WBT over the last 25 quarters. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Icahn Capital LP held the most valuable stake in Welbilt, Inc. (NYSE:WBT), which was worth $259.1 million at the end of the third quarter. On the second spot was Magnetar Capital which amassed $148.7 million worth of shares. Pentwater Capital Management, Water Island Capital, and Millennium 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 One Fin Capital Management allocated the biggest weight to Welbilt, Inc. (NYSE:WBT), around 7% of its 13F portfolio. Havens Advisors is also relatively very bullish on the stock, earmarking 4.72 percent of its 13F equity portfolio to WBT.
Seeing as Welbilt, Inc. (NYSE:WBT) has witnessed declining sentiment from the aggregate hedge fund industry, logic holds that there exists a select few fund managers that elected to cut their positions entirely in the third quarter. At the top of the heap, Simon Sadler’s Segantii Capital said goodbye to the biggest stake of the “upper crust” of funds monitored by Insider Monkey, totaling close to $15.5 million in stock, and Matthew Mark’s Jet Capital Investors was right behind this move, as the fund cut about $13.3 million worth. These moves are intriguing to say the least, as aggregate hedge fund interest was cut by 6 funds in the third quarter.
Let’s now review hedge fund activity in other stocks similar to Welbilt, Inc. (NYSE:WBT). We will take a look at The Simply Good Foods Company (NASDAQ:SMPL), Essential Properties Realty Trust, Inc. (NYSE:EPRT), Nektar Therapeutics (NASDAQ:NKTR), Shake Shack Inc (NYSE:SHAK), M.D.C. Holdings, Inc. (NYSE:MDC), Veracyte Inc (NASDAQ:VCYT), and Steven Madden, Ltd. (NASDAQ:SHOO). This group of stocks’ market valuations match WBT’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| SMPL | 19 | 187340 | 2 |
| EPRT | 10 | 14621 | 3 |
| NKTR | 23 | 272411 | 2 |
| SHAK | 25 | 284891 | 5 |
| MDC | 18 | 32800 | -4 |
| VCYT | 21 | 455716 | -1 |
| SHOO | 23 | 195874 | 5 |
| Average | 19.9 | 206236 | 1.7 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 19.9 hedge funds with bullish positions and the average amount invested in these stocks was $206 million. That figure was $1098 million in WBT’s case. Shake Shack Inc (NYSE:SHAK) is the most popular stock in this table. On the other hand Essential Properties Realty Trust, Inc. (NYSE:EPRT) is the least popular one with only 10 bullish hedge fund positions. Compared to these stocks Welbilt, Inc. (NYSE:WBT) is more popular among hedge funds. Our overall hedge fund sentiment score for WBT is 74.9. 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 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 still beat the market by 5.6 percentage points. Unfortunately WBT wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on WBT were disappointed as the stock returned 1.4% since the end of the third quarter (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 since 2019.
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Disclosure: None. This article was originally published at Insider Monkey.
