Investing in hedge funds can bring large profits, but it’s not for everybody, since hedge funds are available only for high-net-worth individuals. They generate significant returns for investors to justify their large fees and they allocate a lot of time and employ a complex analysis to determine the best stocks to invest in. A particularly interesting group of stocks that hedge funds like is the small-caps. The huge amount of capital does not allow hedge funds to invest a lot in small-caps, but our research showed that their most popular small-cap ideas are less efficiently priced and generate stronger returns than their large- and mega-cap picks and the broader market. That is why we follow the hedge fund activity in the small-cap space.
Washington Prime Group Inc (NYSE:WPG) was in 13 hedge funds’ portfolios at the end of September. WPG has experienced a decrease in enthusiasm from smart money in recent months. There were 13 hedge funds in our database with WPG holdings at the end of the third 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 Armstrong World Industries, Inc. (NYSE:AWI), Washington Real Estate Investment Trust (NYSE:WRE), and Wolverine World Wide, Inc. (NYSE:WWW) to gather more data points.
Follow Washington Prime Group Inc. (NYSE:WPG)
Follow Washington Prime Group Inc. (NYSE:WPG)
We care about hedge fund sentiment because historically hedge funds’ stock picks delivered strong risk adjusted returns. There are certain segments of the market where hedge funds’ stock picks performed much better than its benchmarks. For instance, the 30 most popular mid-cap stocks among the best performing hedge funds returned 18% over the last 12 months outpacing S&P 500 Index by more than 10 percentage points. We developed this strategy 2.5 years ago and started sharing its picks in our quarterly newsletter. It bested the S&P 500 Index ETFs by delivering a solid 39% vs. 22% gain for its benchmarks.
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Now, let’s review the new action regarding Washington Prime Group Inc (NYSE:WPG).
How have hedgies been trading Washington Prime Group Inc (NYSE:WPG)?
At the end of the third quarter, a total of 13 of the hedge funds tracked by Insider Monkey were bullish on this stock, a drop of 24% from the second quarter of 2016. On the other hand, there were a total of 10 hedge funds with a bullish position in WPG at the beginning of this year. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
According to Insider Monkey’s hedge fund database, Renaissance Technologies, led by Jim Simons, holds the largest position in Washington Prime Group Inc (NYSE:WPG). According to its latest 13F filing, the fund has a $36.9 million position in the stock, comprising 0.1% of its 13F portfolio. The second largest stake is held by J. Alan Reid, Jr. of Forward Management, with a $19.4 million position; the fund has 1.5% of its 13F portfolio invested in the stock. Some other members of the smart money that hold long positions consist of Eduardo Abush’s Waterfront Capital Partners, Glenn Russell Dubin’s Highbridge Capital Management and Cliff Asness’s AQR Capital Management. We should note that Forward Management is among our list of the 100 best performing hedge funds which is based on the performance of their 13F long positions in non-microcap stocks.
Because Washington Prime Group Inc (NYSE:WPG) has witnessed declining sentiment from hedge fund managers, it’s easy to see that there was a specific group of funds who were dropping their full holdings in the third quarter. It’s worth mentioning that Michael Swotes’s Castle Ridge Investment Management dropped the biggest investment of all the investors watched by Insider Monkey, valued at close to $4.4 million in stock. Jean-Marie Eveillard’s fund, First Eagle Investment Management, also dropped its stock, about $3.5 million worth of WPG shares.
Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Washington Prime Group Inc (NYSE:WPG) but similarly valued. We will take a look at Armstrong World Industries, Inc. (NYSE:AWI), Washington Real Estate Investment Trust (NYSE:WRE), Wolverine World Wide, Inc. (NYSE:WWW), and LogMeIn Inc (NASDAQ:LOGM). This group of stocks’ market valuations match WPG’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| AWI | 27 | 1263917 | -2 |
| WRE | 11 | 114446 | 3 |
| WWW | 13 | 134599 | -1 |
| LOGM | 27 | 300642 | 6 |
As you can see these stocks had an average of 20 hedge funds with bullish positions and the average amount invested in these stocks was $453 million. That figure was $83 million in WPG’s case. Armstrong World Industries, Inc. (NYSE:AWI) is the most popular stock in this table. On the other hand Washington Real Estate Investment Trust (NYSE:WRE) is the least popular one with only 11 bullish hedge fund positions. Washington Prime Group Inc (NYSE:WPG) 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 AWI might be a better candidate to consider taking a long position in.
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Disclosure: None
