Hedge fund managers like David Einhorn, Dan Loeb, or Carl Icahn became billionaires through reaping large profits for their investors, which is why piggybacking their stock picks may provide us with significant returns as well. Many hedge funds, like Paul Singer’s Elliott Management, are pretty secretive, but we can still get some insights by analyzing their quarterly 13F filings. One of the most fertile grounds for large abnormal returns is hedge funds’ most popular small-cap picks, which are not so widely followed and often trade at a discount to their intrinsic value. In this article we will check out hedge fund activity in another small-cap stock: WisdomTree Investments, Inc. (NASDAQ:WETF).
WisdomTree Investments, Inc. (NASDAQ:WETF) investors should be aware of a decrease in enthusiasm from smart money of late. WETF was in 9 hedge funds’ portfolios at the end of September. There were 11 hedge funds in our database with WETF positions at the end of June. At the end of this article we will also compare WETF to other stocks including Seaspan Corporation (NYSE:SSW), GNC Holdings Inc (NYSE:GNC), and Adecoagro SA (NYSE:AGRO) to get a better sense of its popularity.
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At Insider Monkey, we’ve developed an investment strategy that has delivered market-beating returns over the past 12 months. Our strategy identifies the 100 best-performing funds of the previous quarter from among the collection of 700+ successful funds that we track in our database, which we accomplish using our returns methodology. We then study the portfolios of those 100 funds using the latest 13F data to uncover the 30 most popular mid-cap stocks (market caps of between $1 billion and $10 billion) among them to hold until the next filing period. This strategy delivered 18% gains over the past 12 months, more than doubling the 8% returns enjoyed by the S&P 500 ETFs.
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How have hedgies been trading WisdomTree Investments, Inc. (NASDAQ:WETF)?
Heading into the fourth quarter of 2016, a total of 9 of the hedge funds tracked by Insider Monkey were bullish on this stock, a fall of 18% from the second quarter of 2016. By comparison, 14 hedge funds held shares or bullish call options in WETF heading into this year, so there’s been an even sharper decline in hedge fund ownership in 2016. With hedgies’ sentiment swirling, there exists a few notable hedge fund managers who were increasing their holdings meaningfully (or already accumulated large positions).
According to Insider Monkey’s hedge fund database, Chuck Royce’s Royce & Associates has the most valuable position in WisdomTree Investments, Inc. (NASDAQ:WETF), worth close to $11.8 million. Coming in second is Marshall Wace LLP, led by Paul Marshall and Ian Wace, holding a $2.4 million position. Other hedge funds and institutional investors that are bullish encompass Murray Stahl’s Horizon Asset Management, D E Shaw, one of the largest hedge funds in the world, and Ken Griffin’s Citadel Investment Group. We should note that none of these hedge funds are among our list of the 100 best performing hedge funds, which is based on the performance of their 13F long positions in non-micro-cap stocks.
Now that we’ve mentioned the most bullish investors, let’s also take a look at some funds that said goodbye to their entire stakes in the stock during the third quarter. It’s worth mentioning that Vivek Mehta and Aaron Husock’s ShearLink Capital said goodbye to the biggest position of the 700 funds tracked by Insider Monkey, valued at about $3.5 million in stock, and Benjamin A. Smith’s Laurion Capital Management was right behind this move, as the fund cut about $0.9 million worth of shares.
Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as WisdomTree Investments, Inc. (NASDAQ:WETF) but similarly valued. We will take a look at Seaspan Corporation (NYSE:SSW), GNC Holdings Inc (NYSE:GNC), Adecoagro SA (NYSE:AGRO), and Accelerate Diagnostics Inc (NASDAQ:AXDX). This group of stocks’ market values match WETF’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| SSW | 7 | 21195 | 0 |
| GNC | 28 | 116345 | -3 |
| AGRO | 22 | 390611 | -2 |
| AXDX | 8 | 99622 | 0 |
As you can see these stocks had an average of 16 hedge funds with bullish positions and the average amount invested in these stocks was $157 million. That figure was $21 million in WETF’s case. GNC Holdings Inc (NYSE:GNC) is the most popular stock in this table. On the other hand Seaspan Corporation (NYSE:SSW) is the least popular one with only 7 bullish hedge fund positions. WisdomTree Investments, Inc. (NASDAQ:WETF) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. In this regard GNC might be a better candidate to consider taking a long position in.
Disclosure: None
