Should You Buy WillScot Corporation (WSC)?

In this article we will take a look at whether hedge funds think WillScot Corporation (NASDAQ:WSC) is a good investment right now. We check hedge fund and billionaire investor sentiment before delving into hours of research. Hedge funds spend millions of dollars on Ivy League graduates, unconventional data sources, expert networks, and get tips from investment bankers and industry insiders. Sure they sometimes fail miserably, but their consensus stock picks historically outperformed the market after adjusting for known risk factors.

WillScot Corporation (NASDAQ:WSC) shares haven’t seen a lot of action during the first quarter. Overall, hedge fund sentiment was unchanged. The stock was in 28 hedge funds’ portfolios at the end of the first quarter of 2020. 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 Installed Building Products Inc (NYSE:IBP), Essential Properties Realty Trust, Inc. (NYSE:EPRT), and Global Net Lease, Inc. (NYSE:GNL) to gather more data points. Our calculations also showed that WSC isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks).

Video: Watch our video about the top 5 most popular hedge fund stocks.

Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. 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 58 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.

Joel Greenblatt of Gotham Asset Management

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, 2020’s unprecedented market conditions provide us with the highest number of trading opportunities in a decade. So we are checking out trades like this one as well as this tiny lithium play. 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 the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Now we’re going to view the key hedge fund action surrounding WillScot Corporation (NASDAQ:WSC).

Hedge fund activity in WillScot Corporation (NASDAQ:WSC)

At Q1’s end, a total of 28 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 0% from the previous quarter. On the other hand, there were a total of 22 hedge funds with a bullish position in WSC a year ago. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

The largest stake in WillScot Corporation (NASDAQ:WSC) was held by Broad Bay Capital, which reported holding $27.8 million worth of stock at the end of September. It was followed by Bayberry Capital Partners with a $27.2 million position. Other investors bullish on the company included Rubric Capital Management, Chescapmanager LLC, and Dendur Capital. In terms of the portfolio weights assigned to each position Bayberry Capital Partners allocated the biggest weight to WillScot Corporation (NASDAQ:WSC), around 11.08% of its 13F portfolio. Dendur Capital is also relatively very bullish on the stock, designating 10.62 percent of its 13F equity portfolio to WSC.

Since WillScot Corporation (NASDAQ:WSC) has faced falling interest from the entirety of the hedge funds we track, it’s safe to say that there lies a certain “tier” of fund managers who sold off their entire stakes last quarter. At the top of the heap, Bernard Selz’s Selz Capital dumped the largest investment of the 750 funds monitored by Insider Monkey, comprising close to $25.8 million in stock, and Phil Frohlich’s Prescott Group Capital Management was right behind this move, as the fund sold off about $1.4 million worth. These transactions are important to note, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).

Let’s also examine hedge fund activity in other stocks similar to WillScot Corporation (NASDAQ:WSC). We will take a look at Installed Building Products Inc (NYSE:IBP), Essential Properties Realty Trust, Inc. (NYSE:EPRT), Global Net Lease, Inc. (NYSE:GNL), and Regenxbio Inc (NASDAQ:RGNX). This group of stocks’ market values resemble WSC’s market value.

View table here if you experience formatting issues.

As you can see these stocks had an average of 13.75 hedge funds with bullish positions and the average amount invested in these stocks was $77 million. That figure was $188 million in WSC’s case. Installed Building Products Inc (NYSE:IBP) is the most popular stock in this table. On the other hand Global Net Lease, Inc. (NYSE:GNL) is the least popular one with only 7 bullish hedge fund positions. Compared to these stocks WillScot Corporation (NASDAQ:WSC) is more popular among hedge funds. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks returned 8.3% in 2020 through the end of May but still managed to beat the market by 13.2 percentage points. Hedge funds were also right about betting on WSC as the stock returned 31.7% so far in Q2 (through the end of May) and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.

Disclosure: None. This article was originally published at Insider Monkey.