Is WMIH Corp (WMIH) A Good Stock To Buy?

Between June 25 and October 30th the Russell 2000 ETF (IWM) lagged the larger S&P 500 ETF (SPY) by more than 14 percentage points as investors worried over the possible ramifications of rising interest rates. The hedge funds and institutional investors we track typically invest more in smaller-cap stocks than an average investor, and we have seen data that shows those funds paring back their overall exposure. Those funds cutting positions in small-caps is one reason why volatility has increased. In the following paragraphs, we take a closer look at what hedge funds and prominent investors think of WMIH Corp (NASDAQ:WMIH) and see how the stock is affected by the recent hedge fund activity.

Is WMIH Corp an exceptional investment right now? Prominent investors are becoming more confident. The number of bullish hedge fund bets went up by 30 lately. WMIH was in 34 hedge funds’ portfolios at the end of September. There were 4 hedge funds in our database with WMIH holdings at the end of the previous quarter. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Navios Maritime Acquisition Corp (NYSE:NNA), Kelly Services, Inc. (NASDAQ:KELYA), and Diana Shipping Inc. (NYSE:DSX) to gather more data points.

According to most investors, hedge funds are viewed as worthless, outdated financial tools of years past. While there are more than 8000 funds in operation today, We look at the top tier of this club, approximately 700 funds. These hedge fund managers control the lion’s share of the smart money’s total asset base, and by tracking their unrivaled investments, Insider Monkey has determined many investment strategies that have historically outpaced Mr. Market. Insider Monkey’s small-cap hedge fund strategy outpaced the S&P 500 index by 12 percentage points a year for a decade in their back tests.

Now, let’s take a gander at the key action surrounding WMIH Corp (NASDAQ:WMIH).

How have hedgies been trading WMIH Corp (NASDAQ:WMIH)?

Heading into Q4, a total of 34 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 750% from one quarter earlier. With the smart money’s positions undergoing their usual ebb and flow, there exists a few notable hedge fund managers who were increasing their stakes considerably (or already accumulated large positions).

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Appaloosa Management LP, managed by David Tepper, holds the number one position in WMIH Corp (NASDAQ:WMIH). Appaloosa Management LP has a $43.6 million position in the stock, comprising 1.5% of its 13F portfolio. On Appaloosa Management LP’s heels is Greywolf Capital Management, managed by Jonathan Savitz, which holds a $40.6 million position; the fund has 6.6% of its 13F portfolio invested in the stock. Other peers that are bullish contain Stephen J. Errico’s Locust Wood Capital Advisers, Jeff Buick’s Trishield Capital Management and Richard L. Haydon’s Yield Capital Partners (Y/Cap Management).

Consequently, key hedge funds were leading the bulls’ herd. Appaloosa Management LP, managed by David Tepper, initiated the most outsized position in WMIH Corp (NASDAQ:WMIH). Appaloosa Management LP had $43.6 million invested in the company at the end of the quarter. Jonathan Savitz’s Greywolf Capital Management also made a $40.6 million investment in the stock during the quarter. The other funds with brand new WMIH positions are Jeff Buick’s Trishield Capital Management, Anthony Bozza’s Lakewood Capital Management, and Mark T. Gallogly’s Centerbridge Partners.

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as WMIH Corp (NASDAQ:WMIH) but similarly valued. These stocks are Navios Maritime Acquisition Corp (NYSE:NNA), Kelly Services, Inc. (NASDAQ:KELYA), Diana Shipping Inc. (NYSE:DSX), and Alamo Group, Inc. (NYSE:ALG). This group of stocks’ market caps match WMIH’s market cap.

As you can see these stocks had an average of 10 hedge funds with bullish positions and the average amount invested in these stocks was $57 million. That figure was $169 million in WMIH’s case. Diana Shipping Inc. (NYSE:DSX) is the most popular stock in this table. On the other hand Alamo Group, Inc. (NYSE:ALG) is the least popular one with only 7 bullish hedge fund positions. Compared to these stocks WMIH Corp (NASDAQ:WMIH) is more popular among hedge funds. Considering that hedge funds are fond of this stock in relation to its market cap peers, it may be a good idea to analyze it in detail and potentially include it in your portfolio.