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 (see why hell is coming).
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. Hedge Funds and other institutional investors have just completed filing their 13Fs with the Securities and Exchange Commission, revealing their equity portfolios as of the end of June. At Insider Monkey, we follow nearly 835 active hedge funds and notable investors and by analyzing their 13F filings, we can determine the stocks that they are collectively bullish on. One of their picks is Workiva Inc (NYSE:WK), so let’s take a closer look at the sentiment that surrounds it in the current quarter.
Workiva Inc (NYSE:WK) investors should be aware of a decrease in hedge fund interest lately. Our calculations also showed that WK isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of this article for Q3 rankings).
If you’d ask most traders, hedge funds are perceived as unimportant, outdated investment vehicles of years past. While there are more than 8000 funds in operation at present, Our researchers hone in on the masters of this club, approximately 850 funds. These investment experts command most of all hedge funds’ total asset base, and by tailing their unrivaled stock picks, Insider Monkey has brought to light a number of investment strategies that have historically outrun the market. Insider Monkey’s flagship short hedge fund strategy surpassed the S&P 500 short ETFs by around 20 percentage points per year since its inception in March 2017. Our portfolio of short stocks lost 35.3% since February 2017 (through March 3rd) even though the market was up more than 35% during the same period. We just shared a list of 7 short targets in our latest quarterly update .
David E. Shaw of D.E. Shaw
We leave no stone unturned when looking for the next great investment idea. For example, we believe electric vehicles and energy storage are set to become giant markets, and we want to take advantage of the declining lithium prices amid the COVID-19 pandemic. So we are checking out investment opportunities like this one. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. 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. Keeping this in mind let’s take a peek at the latest hedge fund action regarding Workiva Inc (NYSE:WK).
How have hedgies been trading Workiva Inc (NYSE:WK)?
Heading into the first quarter of 2020, a total of 17 of the hedge funds tracked by Insider Monkey were long this stock, a change of -23% from one quarter earlier. On the other hand, there were a total of 16 hedge funds with a bullish position in WK a year ago. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Renaissance Technologies was the largest shareholder of Workiva Inc (NYSE:WK), with a stake worth $73.4 million reported as of the end of September. Trailing Renaissance Technologies was D E Shaw, which amassed a stake valued at $15.8 million. Two Sigma Advisors, Millennium Management, and StackLine 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 StackLine Partners allocated the biggest weight to Workiva Inc (NYSE:WK), around 3.89% of its 13F portfolio. Hawk Ridge Management is also relatively very bullish on the stock, dishing out 0.27 percent of its 13F equity portfolio to WK.
Since Workiva Inc (NYSE:WK) has faced declining sentiment from the smart money, logic holds that there lies a certain “tier” of fund managers who sold off their positions entirely in the third quarter. It’s worth mentioning that Dmitry Balyasny’s Balyasny Asset Management sold off the largest investment of all the hedgies tracked by Insider Monkey, comprising an estimated $2.9 million in stock, and John Osterweis’s Osterweis Capital Management was right behind this move, as the fund dropped about $2.8 million worth. These transactions are intriguing to say the least, as aggregate hedge fund interest was cut by 5 funds in the third quarter.
Let’s go over hedge fund activity in other stocks similar to Workiva Inc (NYSE:WK). We will take a look at Federal Signal Corporation (NYSE:FSS), Covanta Holding Corporation (NYSE:CVA), Xencor Inc (NASDAQ:XNCR), and Redfin Corporation (NASDAQ:RDFN). All of these stocks’ market caps are closest to WK’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| FSS | 18 | 90579 | -2 |
| CVA | 19 | 105799 | 5 |
| XNCR | 16 | 107347 | 2 |
| RDFN | 15 | 140093 | -1 |
| Average | 17 | 110955 | 1 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 17 hedge funds with bullish positions and the average amount invested in these stocks was $111 million. That figure was $136 million in WK’s case. Covanta Holding Corporation (NYSE:CVA) is the most popular stock in this table. On the other hand Redfin Corporation (NASDAQ:RDFN) is the least popular one with only 15 bullish hedge fund positions. Workiva Inc (NYSE:WK) 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. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks lost 13.0% in 2020 through April 6th but beat the market by 4.2 percentage points. Unfortunately WK wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); WK investors were disappointed as the stock returned -21.3% 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 in 2020.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.
