We know that hedge funds generate strong, risk-adjusted returns over the long run, therefore imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, smart money investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn’t mean that they don’t have occasional colossal losses; they do (like Melvin Capital’s recent GameStop losses). However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, as the current round of 13F filings has just ended, let’s examine the smart money sentiment towards Westwood Holdings Group, Inc. (NYSE:WHG).
Is WHG a good stock to buy? Westwood Holdings Group, Inc. (NYSE:WHG) shares haven’t seen a lot of action during the second quarter. Overall, hedge fund sentiment was unchanged. The stock was in 6 hedge funds’ portfolios at the end of March. Our calculations also showed that WHG isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings). The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Flotek Industries Inc (NYSE:FTK), Inuvo, Inc. (NYSE:INUV), and Vivos Therapeutics, Inc. (NASDAQ:VVOS) to gather more data points.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 115 percentage points since March 2017 (see the details here). That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
David Siegel of Two Sigma Advisors
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, an activist hedge fund owns nearly 40% of this $24 biotech stock and is trying to buy the rest for around $50. So, we recommended a long position to our monthly premium newsletter subscribers. We go through lists like the 10 best battery 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. 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 homepage. Now we’re going to check out the new hedge fund action surrounding Westwood Holdings Group, Inc. (NYSE:WHG).
Do Hedge Funds Think WHG Is A Good Stock To Buy Now?
At first quarter’s end, a total of 6 of the hedge funds tracked by Insider Monkey were long this stock, a change of 0% from the previous quarter. The graph below displays the number of hedge funds with bullish position in WHG over the last 23 quarters. With hedgies’ capital changing hands, there exists an “upper tier” of key hedge fund managers who were adding to their stakes significantly (or already accumulated large positions).
When looking at the institutional investors followed by Insider Monkey, Renaissance Technologies has the number one position in Westwood Holdings Group, Inc. (NYSE:WHG), worth close to $10.3 million, corresponding to less than 0.1%% of its total 13F portfolio. The second largest stake is held by GAMCO Investors, led by Mario Gabelli, holding a $7.4 million position; 0.1% of its 13F portfolio is allocated to the stock. Some other hedge funds and institutional investors that are bullish comprise Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital, D. E. Shaw’s D E Shaw and Scott Wallace’s Wallace Capital Management. In terms of the portfolio weights assigned to each position GAMCO Investors allocated the biggest weight to Westwood Holdings Group, Inc. (NYSE:WHG), around 0.07% of its 13F portfolio. Wallace Capital Management is also relatively very bullish on the stock, earmarking 0.02 percent of its 13F equity portfolio to WHG.
We view hedge fund activity in the stock unfavorable, but in this case there was only a single hedge fund selling its entire position: Osmium Partners. One hedge fund selling its entire position doesn’t always imply a bearish intent. Theoretically a hedge fund may decide to sell a promising position in order to invest the proceeds in a more promising idea. However, we don’t think this is the case in this case because only one of the 800+ hedge funds tracked by Insider Monkey identified as a viable investment and initiated a position in the stock (that fund was Two Sigma Advisors).
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Westwood Holdings Group, Inc. (NYSE:WHG) but similarly valued. These stocks are Flotek Industries Inc (NYSE:FTK), Inuvo, Inc. (NYSE:INUV), Vivos Therapeutics, Inc. (NASDAQ:VVOS), Fonar Corporation (NASDAQ:FONR), Viridian Therapeutics, Inc. (NASDAQ:VRDN), Park City Group, Inc. (NASDAQ:PCYG), and Limestone Bancorp, Inc. (NASDAQ:LMST). This group of stocks’ market caps resemble WHG’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| FTK | 10 | 16153 | -3 |
| INUV | 1 | 129 | -1 |
| VVOS | 3 | 2940 | 1 |
| FONR | 5 | 10158 | 0 |
| VRDN | 16 | 57699 | 6 |
| PCYG | 1 | 1427 | -1 |
| LMST | 4 | 7425 | 2 |
| Average | 5.7 | 13704 | 0.6 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 5.7 hedge funds with bullish positions and the average amount invested in these stocks was $14 million. That figure was $20 million in WHG’s case. Viridian Therapeutics, Inc. (NASDAQ:VRDN) is the most popular stock in this table. On the other hand Inuvo, Inc. (NYSE:INUV) is the least popular one with only 1 bullish hedge fund positions. Westwood Holdings Group, Inc. (NYSE:WHG) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for WHG is 38. 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 19.3% in 2021 through June 25th and still beat the market by 4.8 percentage points. Hedge funds were also right about betting on WHG as the stock returned 50.2% since the end of Q1 (through 6/25) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
Follow Westwood Holdings Group Inc (NYSE:WHG)
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Disclosure: None. This article was originally published at Insider Monkey.
