In this article we will check out the progression of hedge fund sentiment towards Wix.Com Ltd (NASDAQ:WIX) and determine whether it is a good investment right now. We at Insider Monkey like to examine what billionaires and hedge funds think of a company before spending days of research on it. Given their 2 and 20 payment structure, hedge funds have more incentives and resources than the average investor. The funds have access to expert networks and get tips from industry insiders. They also employ numerous Ivy League graduates and MBAs. Like everyone else, hedge funds perform miserably at times, but their consensus picks have historically outperformed the market after risk adjustments.
Is Wix.Com Ltd (NASDAQ:WIX) going to take off soon? The smart money was turning less bullish. The number of bullish hedge fund bets went down by 5 lately. Wix.Com Ltd (NASDAQ:WIX) was in 35 hedge funds’ portfolios at the end of June. The all time high for this statistic is 40. Our calculations also showed that WIX isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings).
So, why do we pay attention to hedge fund sentiment before making any investment decisions? Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 79 percentage points since March 2017 (see the details here). We have been able to outperform the passive index funds by tracking the moves of corporate insiders and hedge funds, and we believe small investors can benefit a lot from reading hedge fund investor letters and 13F filings.
Tom Gayner of Markel Gayner Asset Management
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, we like undervalued, EBITDA-positive growth stocks, so we are checking out stock pitches like this emerging biotech stock. We go through lists like the 10 best EV 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. With all of this in mind we’re going to view the key hedge fund action surrounding Wix.Com Ltd (NASDAQ:WIX).
Do Hedge Funds Think WIX Is A Good Stock To Buy Now?
At Q2’s end, a total of 35 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -13% from the previous quarter. By comparison, 27 hedge funds held shares or bullish call options in WIX 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.
Among these funds, Steadfast Capital Management held the most valuable stake in Wix.Com Ltd (NASDAQ:WIX), which was worth $402.2 million at the end of the second quarter. On the second spot was Marcho Partners which amassed $152.8 million worth of shares. Point State Capital, SQN Investors, and Hound Partners were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Blackcrane Capital allocated the biggest weight to Wix.Com Ltd (NASDAQ:WIX), around 17.2% of its 13F portfolio. General Equity Partners is also relatively very bullish on the stock, designating 12.36 percent of its 13F equity portfolio to WIX.
Due to the fact that Wix.Com Ltd (NASDAQ:WIX) has faced bearish sentiment from the aggregate hedge fund industry, it’s easy to see that there was a specific group of money managers who sold off their positions entirely heading into Q3. It’s worth mentioning that Richard Gerson and Navroz D. Udwadia’s Falcon Edge Capital dumped the largest position of the “upper crust” of funds watched by Insider Monkey, comprising an estimated $26.1 million in stock, and Renaissance Technologies was right behind this move, as the fund dumped about $9.1 million worth. These bearish behaviors are interesting, as total hedge fund interest dropped by 5 funds heading into Q3.
Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Wix.Com Ltd (NASDAQ:WIX) but similarly valued. These stocks are ON Semiconductor Corporation (NASDAQ:ON), Markel Corporation (NYSE:MKL), TAL Education Group (NYSE:TAL), WPP Plc (NASDAQ:WPP), PPD, Inc. (NASDAQ:PPD), Franklin Resources, Inc. (NYSE:BEN), and Quest Diagnostics Incorporated (NYSE:DGX). All of these stocks’ market caps match WIX’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| ON | 44 | 1021403 | 3 |
| MKL | 33 | 709075 | 3 |
| TAL | 27 | 606671 | -11 |
| WPP | 6 | 23931 | 1 |
| PPD | 37 | 1910889 | 8 |
| BEN | 30 | 205166 | -1 |
| DGX | 31 | 376501 | -3 |
| Average | 29.7 | 693377 | 0 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 29.7 hedge funds with bullish positions and the average amount invested in these stocks was $693 million. That figure was $1381 million in WIX’s case. ON Semiconductor Corporation (NASDAQ:ON) is the most popular stock in this table. On the other hand WPP Plc (NASDAQ:WPP) is the least popular one with only 6 bullish hedge fund positions. Wix.Com Ltd (NASDAQ:WIX) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for WIX is 64.4. 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 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 21.8% in 2021 through October 11th and beat the market again by 4.4 percentage points. Unfortunately WIX wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on WIX were disappointed as the stock returned -37.3% since the end of June (through 10/11) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as many of these stocks already outperformed the market since 2019.
Follow Wix.com Ltd. (NASDAQ:WIX)
Follow Wix.com Ltd. (NASDAQ:WIX)
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Disclosure: None. This article was originally published at Insider Monkey.
