More and More Hedge Funds Selling The Wendy’s Company (WEN)

Like everyone else, elite investors don’t always get it right. Some of their top consensus picks, such as Micron and Anadarko Petroleum, have not done well during the last 12 months, ending in October, for various reasons. Nevertheless, the data shows elite investors’ consensus picks have done well on average. The top 30 S&P 500 stocks among hedge funds at the end of September 2014 yielded an average return of 9.5% during the last four quarters ending in October and 63% of those 30 stocks outperformed the market. The S&P 500 Index returned only 5.2% during the same period and less than 49% of its constituents managed to beat this return. Because their consensus picks have done well, we pay attention to what elite funds think before doing extensive research on a stock. In this article, we take a closer look at The Wendy’s Company (NASDAQ:WEN) from the perspective of these elite funds.

The Wendy’s Company (NASDAQ:WEN) investors should pay attention to a big decrease in hedge fund sentiment of late, with The Wendy’s Company being held in just 26 portfolios of the investors that we track as of September 30, down from 38 on June 30. At the end of this article we will also compare The Wendy’s Company to other stocks including Avolon Holdings Ltd (NYSE:AVOL), UMB Financial Corporation (NASDAQ:UMBF), and PIMCO Dynamic Credit Income Fund (NYSE:PCI) to get a better sense of its popularity.

In the eyes of most traders, hedge funds are assumed to be unimportant, outdated financial tools of the past. While there are more than 8,000 funds with their doors open today, we look at the top tier of this club, around 700 funds. It is estimated that this group of investors preside over bulk of the smart money’s total asset base, and by watching their finest equity investments, Insider Monkey has deciphered a few investment strategies that have historically beaten the broader indices. Insider Monkey’s small-cap hedge fund strategy exceeded the S&P 500 index by 12 percentage points per annum for a decade in their back tests.

Now, we’re going to check out the key action encompassing The Wendy’s Company (NASDAQ:WEN).

How are hedge funds trading The Wendy’s Company (NASDAQ:WEN)?

Heading into Q4, a total of 26 of the hedge funds tracked by Insider Monkey were long this stock, a 32% decline from the second quarter. With hedgies’ positions undergoing their usual ebb and flow, there exists a select group of key hedge fund managers who were boosting their holdings considerably (or had already accumulated large positions).

Of the funds tracked by Insider Monkey, Nelson Peltz’s Trian Partners has the largest position in The Wendy’s Company (NASDAQ:WEN), worth close to $352.9 million, corresponding to 3% of its total 13F portfolio. The second-largest stake is held by Murray Stahl of Horizon Asset Management, with a $145.1 million position; the fund has 2.6% of its 13F portfolio invested in the stock. Remaining members of the smart money that are bullish comprise D E Shaw, Ken Griffin’s Citadel Investment Group, and Renaissance Technologies.

Judging by the fact that The Wendy’s Company (NASDAQ:WEN) has faced a declination in interest from the entirety of the hedge funds we track, we can see that there is a sect of hedgies that elected to cut their entire stakes last quarter. At the top of the heap, David Abrams’ Abrams Capital Management said goodbye to the biggest stake of the 700 funds monitored by Insider Monkey, comprising an estimated $47.9 million in stock. Jason Karp’s fund, Tourbillon Capital Partners, also sold off its stock, about $47.4 million worth. These bearish behaviors are intriguing to say the least, as aggregate hedge fund interest was cut by 12 funds last quarter.

Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as The Wendy’s Company (NASDAQ:WEN) but similarly valued. We will take a look at Avolon Holdings Ltd (NYSE:AVOL), UMB Financial Corporation (NASDAQ:UMBF), PIMCO Dynamic Credit Income Fund (NYSE:PCI), and Kennedy-Wilson Holdings Inc (NYSE:KW). This group of stocks’ market values are similar to The Wendy’s Company’s market value.

As you can see these stocks had an average of 11.5 hedge funds with bullish positions and the average amount invested in these stocks was $198 million. That figure was $632 million in The Wendy’s Company’s case. Kennedy-Wilson Holdings Inc (NYSE:KW) is the most popular stock in this table. On the other hand PIMCO Dynamic Credit Income Fund (NYSE:PCI) is the least popular one with only 6 bullish hedge fund positions. Compared to these stocks The Wendy’s Company (NASDAQ:WEN) is more popular among hedge funds. Considering that hedge funds are still 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, bearing in mind the recent large dip in sentiment.