We hate to say this but, we told you so. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW and predicted a US recession when the S&P 500 Index was trading at the 3150 level. We also told you to short the market and buy long-term Treasury bonds. Our article also called for a total international travel ban. While we were warning you, President Trump minimized the threat and failed to act promptly. As a result of his inaction, we will now experience a deeper recession.
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We at Insider Monkey have plowed through 835 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds’ and investors’ portfolio positions as of December 31st. In this article we look at what those investors think of Wipro Limited (NYSE:WIT).
Wipro Limited (NYSE:WIT) shares haven’t seen a lot of action during the fourth quarter. Overall, hedge fund sentiment was unchanged. The stock was in 12 hedge funds’ portfolios at the end of the fourth quarter of 2019. At the end of this article we will also compare WIT to other stocks including Boston Properties, Inc. (NYSE:BXP), 0, and Fastenal Company (NASDAQ:FAST) to get a better sense of its popularity.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
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 72.9% since March 2017 and outperformed the S&P 500 ETFs by more than 41 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.
Ken Fisher of Fisher Asset Management
We leave no stone unturned when looking for the next great investment idea. For example we recently identified a stock that trades 25% below the net cash on its balance sheet. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences, and go through short-term trade recommendations like this one. We even check out the recommendations of services with hard to believe track records. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Now we’re going to review the key hedge fund action surrounding Wipro Limited (NYSE:WIT).
Hedge fund activity in Wipro Limited (NYSE:WIT)
At Q4’s end, a total of 12 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 0% from the previous quarter. The graph below displays the number of hedge funds with bullish position in WIT over the last 18 quarters. With the smart money’s positions undergoing their usual ebb and flow, there exists a select group of noteworthy hedge fund managers who were increasing their stakes substantially (or already accumulated large positions).
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Cliff Asness’s AQR Capital Management has the largest position in Wipro Limited (NYSE:WIT), worth close to $27.6 million, comprising less than 0.1%% of its total 13F portfolio. The second most bullish fund manager is LMR Partners, led by Ben Levine, Andrew Manuel and Stefan Renold, holding a $19.7 million position; the fund has 0.9% of its 13F portfolio invested in the stock. Other peers that hold long positions include Ken Fisher’s Fisher Asset Management, Simon Sadler’s Segantii Capital and Renaissance Technologies. In terms of the portfolio weights assigned to each position Sensato Capital Management allocated the biggest weight to Wipro Limited (NYSE:WIT), around 2.3% of its 13F portfolio. Segantii Capital is also relatively very bullish on the stock, designating 0.98 percent of its 13F equity portfolio to WIT.
We view hedge fund activity in the stock unfavorable, but in this case there was only a single hedge fund selling its entire position: Marshall Wace LLP. 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 Paloma Partners).
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Wipro Limited (NYSE:WIT) but similarly valued. We will take a look at Boston Properties, Inc. (NYSE:BXP), XP Inc. (NASDAQ:XP), Fastenal Company (NASDAQ:FAST), and Ball Corporation (NYSE:BLL). All of these stocks’ market caps match WIT’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| BXP | 20 | 450068 | -7 |
| XP | 28 | 398066 | 28 |
| FAST | 33 | 834608 | 3 |
| BLL | 44 | 679601 | 10 |
| Average | 31.25 | 590586 | 8.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 31.25 hedge funds with bullish positions and the average amount invested in these stocks was $591 million. That figure was $98 million in WIT’s case. Ball Corporation (NYSE:BLL) is the most popular stock in this table. On the other hand Boston Properties, Inc. (NYSE:BXP) is the least popular one with only 20 bullish hedge fund positions. Compared to these stocks Wipro Limited (NYSE:WIT) is even less popular than BXP. Hedge funds dodged a bullet by taking a bearish stance towards WIT. Our calculations showed that the top 20 most popular hedge fund stocks returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks lost 22.3% in 2020 through March 16th but managed to beat the market by 3.2 percentage points. Unfortunately WIT wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); WIT investors were disappointed as the stock returned -26.1% during the same time period and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as most of these stocks already outperformed the market so far in Q1.
Disclosure: None. This article was originally published at Insider Monkey.
