Like everyone else, elite investors make mistakes. Some of their top consensus picks, such as Micron and Anadarko Petroleum, have not done well during the last 12 months ending in October due to various reasons. Nevertheless, the data show 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 sixty three percent of these 30 stocks outperformed the market. 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 WEX Inc (NYSE:WEX) from the perspective of those elite funds.
WEX Inc has experienced an increase in hedge fund sentiment of late. WEX was in 16 hedge funds’ portfolios at the end of September, as compared to 13 hedge funds with WEX holdings at the end of the previous quarter. At the end of this article we will also compare WEX to other stocks, including MDU Resources Group Inc (NYSE:MDU), Braskem SA (ADR) (NYSE:BAK), and Tribune Media Co (NYSE:TRCO) to get a better sense of its popularity.
Follow Wex Inc. (NYSE:WEX)
Follow Wex Inc. (NYSE:WEX)
In the financial world, there are a multitude of formulas stock market investors use to assess stocks. Some of the most innovative formulas are hedge fund and insider trading moves. we have shown that, historically, those who follow the top picks of the top fund managers can outpace the broader indices by a superb amount (see the details here).
Keeping this in mind, we’re going to check out the key action surrounding WEX Inc (NYSE:WEX).
How are hedge funds trading WEX Inc (NYSE:WEX)?
At the end of the third quarter, a total of 16 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 23% from the previous quarter. With hedge funds’ positions undergoing their usual ebb and flow, there exists an “upper tier” of noteworthy hedge fund managers who were increasing their holdings significantly (or already accumulated large positions).
When looking at the institutional investors followed by Insider Monkey, Daruma Asset Management, managed by Mariko Gordon, holds the biggest position in WEX Inc (NYSE:WEX). Daruma Asset Management has a $46.3 million position in the stock, comprising 2.8% of its 13F portfolio. Coming in second is MSD Capital, led by Glenn Fuhrman and John Phelan, holding a $42.7 million position; 5.7% of its 13F portfolio is allocated to the stock. Remaining hedge funds and institutional investors with similar optimism contain Jonathan Bloomberg’s BloombergSen, Jim Simons’s Renaissance Technologies and Paul Reeder and Edward Shapiro’s PAR Capital Management.
Now, some big names were leading the bulls’ herd. Echo Street Capital Management, managed by Greg Poole, assembled the largest position in WEX Inc (NYSE:WEX). Echo Street Capital Management had $4.3 million invested in the company at the end of the quarter. Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital also initiated a $2.7 million position during the quarter. The other funds with new positions in the stock are Cliff Asness’s AQR Capital Management, George Hall’s Clinton Group, and Paul Marshall and Ian Wace’s Marshall Wace LLP.
Let’s now review hedge fund activity in other stocks similar to WEX Inc (NYSE:WEX). These stocks are MDU Resources Group Inc (NYSE:MDU), Braskem SA (ADR) (NYSE:BAK), Tribune Media Co (NYSE:TRCO), and TreeHouse Foods Inc. (NYSE:THS). This group of stocks’ market valuations match WEX’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| MDU | 11 | 14595 | 1 |
| BAK | 5 | 9695 | 1 |
| TRCO | 28 | 1361330 | -10 |
| THS | 21 | 462401 | 2 |
As you can see these stocks had an average of 16.25 hedge funds with bullish positions and the average amount invested in these stocks was $462 million. That figure was $170 million in WEX’s case. Tribune Media Co (NYSE:TRCO) is the most popular stock in this table, while Braskem SA (ADR) (NYSE:BAK) is the least popular one with only five bullish hedge fund positions. WEX Inc (NYSE:WEX) 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 TRCO might be a better candidate to consider a long position.
