In this article we are going to use hedge fund sentiment as a tool and determine whether Wingstop Inc (NASDAQ:WING) 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 WING stock a buy? Wingstop Inc (NASDAQ:WING) investors should pay attention to a decrease in enthusiasm from smart money lately. Wingstop Inc (NASDAQ:WING) was in 28 hedge funds’ portfolios at the end of December. The all time high for this statistic is 32. There were 32 hedge funds in our database with WING holdings at the end of September. Our calculations also showed that WING isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings).
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s monthly stock picks returned 197% since March 2017 and outperformed the S&P 500 ETFs by more than 124 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
David Siegel of Two Sigma Advisors
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, auto parts business is a recession resistant business, so we are taking a closer look at this discount auto parts stock that is growing at a 196% annualized rate. We go through lists like the 15 best micro-cap stocks to buy now 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 surrounding Wingstop Inc (NASDAQ:WING).
Do Hedge Funds Think WING Is A Good Stock To Buy Now?
Heading into the first quarter of 2021, a total of 28 of the hedge funds tracked by Insider Monkey were long this stock, a change of -13% from one quarter earlier. By comparison, 24 hedge funds held shares or bullish call options in WING a year ago. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
According to Insider Monkey’s hedge fund database, Ken Griffin’s Citadel Investment Group has the biggest position in Wingstop Inc (NASDAQ:WING), worth close to $78.5 million, comprising less than 0.1%% of its total 13F portfolio. Sitting at the No. 2 spot is Renaissance Technologies, which holds a $46.3 million position; 0.1% of its 13F portfolio is allocated to the company. Remaining peers that hold long positions comprise John Overdeck and David Siegel’s Two Sigma Advisors, Brett Barakett’s Tremblant Capital and Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital. In terms of the portfolio weights assigned to each position Tremblant Capital allocated the biggest weight to Wingstop Inc (NASDAQ:WING), around 0.97% of its 13F portfolio. Lee Capital Management is also relatively very bullish on the stock, designating 0.47 percent of its 13F equity portfolio to WING.
Judging by the fact that Wingstop Inc (NASDAQ:WING) has witnessed declining sentiment from hedge fund managers, it’s easy to see that there is a sect of fund managers that elected to cut their full holdings by the end of the fourth quarter. Interestingly, Kamyar Khajavi’s MIK Capital sold off the biggest position of all the hedgies followed by Insider Monkey, totaling an estimated $6.6 million in stock, and Richard Driehaus’s Driehaus Capital was right behind this move, as the fund dumped about $4.9 million worth. These bearish behaviors are intriguing to say the least, as total hedge fund interest fell by 4 funds by the end of the fourth quarter.
Let’s check out hedge fund activity in other stocks similar to Wingstop Inc (NASDAQ:WING). We will take a look at WESCO International, Inc. (NYSE:WCC), Agora, Inc. (NASDAQ:API), Millicom International Cellular S.A. (NASDAQ:TIGO), Cardlytics, Inc. (NASDAQ:CDLX), Companhia Paranaense de Energia (NYSE:ELP), Covetrus, Inc. (NASDAQ:CVET), and Desktop Metal, Inc. (NYSE:DM). This group of stocks’ market values match WING’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| WCC | 23 | 918179 | -6 |
| API | 14 | 607359 | -10 |
| TIGO | 6 | 65440 | -2 |
| CDLX | 32 | 1332290 | 3 |
| ELP | 9 | 20801 | 3 |
| CVET | 19 | 184581 | -5 |
| DM | 24 | 320040 | 24 |
| Average | 18.1 | 492670 | 1 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 18.1 hedge funds with bullish positions and the average amount invested in these stocks was $493 million. That figure was $303 million in WING’s case. Cardlytics, Inc. (NASDAQ:CDLX) is the most popular stock in this table. On the other hand Millicom International Cellular S.A. (NASDAQ:TIGO) is the least popular one with only 6 bullish hedge fund positions. Wingstop Inc (NASDAQ:WING) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for WING is 69.6. 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 positive signal but 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 beat the market again by 0.9 percentage points. Unfortunately WING wasn’t nearly as popular as these 30 stocks and hedge funds that were betting on WING were disappointed as the stock returned 4% 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 many of these stocks already outperformed the market since 2019.
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Disclosure: None. This article was originally published at Insider Monkey.
