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 WEX Inc (NYSE:WEX) changed recently.
Is WEX stock a buy? WEX Inc (NYSE:WEX) shares haven’t seen a lot of action during the second quarter. Overall, hedge fund sentiment was unchanged. The stock was in 26 hedge funds’ portfolios at the end of the fourth quarter of 2020. Our calculations also showed that WEX isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings). At the end of this article we will also compare WEX to other stocks including Store Capital Corporation (NYSE:STOR), Neurocrine Biosciences, Inc. (NASDAQ:NBIX), and Ascendis Pharma A/S (NASDAQ:ASND) to get a better sense of its popularity.
Paul Reeder of PAR Capital Management
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, the CBD market is growing at a 33% annualized rate, so we are taking a closer look at this under-the-radar hemp stock. We go through lists like the 10 best biotech stocks under $10 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. With all of this in mind we’re going to take a look at the fresh hedge fund action regarding WEX Inc (NYSE:WEX).
Do Hedge Funds Think WEX Is A Good Stock To Buy Now?
At the end of the fourth quarter, a total of 26 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 0% from the third quarter of 2020. Below, you can check out the change in hedge fund sentiment towards WEX over the last 22 quarters. With the smart money’s positions undergoing their usual ebb and flow, there exists an “upper tier” of noteworthy hedge fund managers who were adding to their holdings significantly (or already accumulated large positions).
When looking at the institutional investors followed by Insider Monkey, PAR Capital Management, managed by Paul Reeder and Edward Shapiro, holds the number one position in WEX Inc (NYSE:WEX). PAR Capital Management has a $203.5 million position in the stock, comprising 5.9% of its 13F portfolio. The second largest stake is held by Tremblant Capital, led by Brett Barakett, holding a $81.8 million position; the fund has 2.3% of its 13F portfolio invested in the stock. Other professional money managers that are bullish comprise Ken Griffin’s Citadel Investment Group, John Overdeck and David Siegel’s Two Sigma Advisors and Neal Nathani and Darren Dinneen’s Totem Point Management. In terms of the portfolio weights assigned to each position PAR Capital Management allocated the biggest weight to WEX Inc (NYSE:WEX), around 5.94% of its 13F portfolio. Totem Point Management is also relatively very bullish on the stock, designating 5.45 percent of its 13F equity portfolio to WEX.
Earlier we told you that the aggregate hedge fund interest in the stock was unchanged and we view this as a negative development. Even though there weren’t any hedge funds dumping their holdings during the third quarter, there weren’t any hedge funds initiating brand new positions. This indicates that hedge funds, at the very best, perceive this stock as dead money and they haven’t identified any viable catalysts that can attract investor attention.
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as WEX Inc (NYSE:WEX) but similarly valued. These stocks are Store Capital Corporation (NYSE:STOR), Neurocrine Biosciences, Inc. (NASDAQ:NBIX), Ascendis Pharma A/S (NASDAQ:ASND), AMERCO (NASDAQ:UHAL), RealPage, Inc. (NASDAQ:RP), AptarGroup, Inc. (NYSE:ATR), and A. O. Smith Corporation (NYSE:AOS). This group of stocks’ market values match WEX’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| STOR | 12 | 862680 | -8 |
| NBIX | 31 | 936476 | -7 |
| ASND | 31 | 2830045 | 2 |
| UHAL | 21 | 540146 | 2 |
| RP | 48 | 1897711 | 9 |
| ATR | 20 | 271051 | -8 |
| AOS | 31 | 291962 | 1 |
| Average | 27.7 | 1090010 | -1.3 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 27.7 hedge funds with bullish positions and the average amount invested in these stocks was $1090 million. That figure was $423 million in WEX’s case. RealPage, Inc. (NASDAQ:RP) is the most popular stock in this table. On the other hand Store Capital Corporation (NYSE:STOR) is the least popular one with only 12 bullish hedge fund positions. WEX Inc (NYSE:WEX) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for WEX is 46.7. 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. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. 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 surpassed the market again by 0.9 percentage points. Unfortunately WEX wasn’t nearly as popular as these 30 stocks (hedge fund sentiment was quite bearish); WEX investors were disappointed as the stock returned 11.2% since the end of December (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 in 2020.
Follow Wex Inc. (NYSE:WEX)
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Disclosure: None. This article was originally published at Insider Monkey.
