Smart Money Continues to Slim Down on Weight Watchers International, Inc. (WTW)

Looking for high-potential stocks? Just follow the big players within the hedge fund industry. Why should you do so? Let’s take a brief look at what statistics have to say about hedge funds’ stock picking abilities to illustrate. The Standard and Poor’s 500 Index returned approximately 7.6% in the 12 months ending November 21, with more than 51% of the stocks in the index failing to beat the benchmark. Therefore, the odds that one will pin down a winner by randomly picking a stock are less than the odds in a fair coin-tossing game. Conversely, best performing hedge funds’ 30 preferred mid-cap stocks generated a return of 18% during the same 12-month period. Coincidence? It might happen to be so, but it is unlikely. Our research covering a 17-year period indicates that hedge funds’ stock picks generate superior risk-adjusted returns. That’s why we believe it is wise to check hedge fund activity before you invest your time or your savings on a stock like Weight Watchers International, Inc. (NYSE:WTW).

Weight Watchers International, Inc. (NYSE:WTW) investors should be aware of a decrease in hedge fund interest of late. There were 12 hedge funds in our database with WTW holdings at the end of September, down by 6 quarter-over-quarter. At the end of this article we will also compare WTW to other stocks including Aegion Corp – Class A (NASDAQ:AEGN), Qiwi PLC (NASDAQ:QIWI), and Teekay Corporation (NYSE:TK) to get a better sense of its popularity.

We follow over 700 hedge funds and other institutional investors and by analyzing their quarterly 13F filings, we identify stocks that they are collectively bullish on and develop investment strategies based on this data. One strategy that outperformed the market over the last year involves selecting the 100 best-performing funds and identifying the 30 mid-cap stocks that they are collectively most bullish on. Over the past year, this strategy generated returns of 18%, topping the 8% gain registered by S&P 500 ETFs. We launched this strategy 2.5 years ago and it returned more than 39% since then, vs. 22% gain registered by the S&P 500 ETFs.

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What does the smart money think about Weight Watchers International, Inc. (NYSE:WTW)?

At Q3’s end, a total of 12 of the hedge funds tracked by Insider Monkey were bullish on this stock, a 33% fall from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards WTW over the last 5 quarters, which includes a 50% decline in bullish positions in 2016. With hedgies’ capital changing hands, there exists a select group of key hedge fund managers who were boosting their stakes meaningfully (or already accumulated large positions).

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Jonathan Auerbach’s Hound Partners has the largest position in Weight Watchers International, Inc. (NYSE:WTW), worth close to $8.3 million. On Hound Partners’ heels is Adage Capital Management, led by Phill Gross and Robert Atchinson, which holds a $8.3 million position. Some other members of the smart money that hold long positions encompass Gabriel Plotkin’s Melvin Capital Management, Joel Ramin’s 12 West Capital Management, and D E Shaw, one of the biggest hedge funds in the world. We should note that none of these hedge funds are 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.

Now that we’ve mentioned the most bullish investors, let’s also take a look at some funds that cashed in their entire stakes in the stock during the third quarter. It’s worth mentioning that Philippe Laffont’s Coatue Management cashed in the biggest position of the “upper crust” of funds followed by Insider Monkey, valued at an estimated $9 million in stock, and Israel Englander’s Millennium Management was right behind this move, as the fund sold off about $1.6 million worth of shares.

Let’s go over hedge fund activity in other stocks similar to Weight Watchers International, Inc. (NYSE:WTW). We will take a look at Aegion Corp – Class A (NASDAQ:AEGN), Qiwi PLC (NASDAQ:QIWI), Teekay Corporation (NYSE:TK), and EarthLink, Inc. (NASDAQ:ELNK). All of these stocks’ market caps match WTW’s market cap.

As you can see these stocks had an average of 13 hedge funds with bullish positions and the average amount invested in these stocks was $71 million. That figure was $45 million in WTW’s case. EarthLink, Inc. (NASDAQ:ELNK) is the most popular stock in this table. On the other hand Qiwi PLC (NASDAQ:QIWI) is the least popular one with only 9 bullish hedge fund positions. Weight Watchers International, Inc. (NYSE:WTW) 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 ELNK might be a better candidate to consider taking a long position in.

Disclosure: None