We hate to say this but, we told you so. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW and predicted a US recession when the S&P 500 Index was trading at the 3150 level. We also told you to short the market and buy long-term Treasury bonds. Our article also called for a total international travel ban. While we were warning you, President Trump minimized the threat and failed to act promptly. As a result of his inaction, we will now experience a deeper recession (read our latest 10 coronavirus predictions).
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. Keeping this in mind, let’s take a look at whether Wausau Paper Corp. (NYSE:WPP) is a good investment right now. We like to check what the smart money thinks first before doing extensive research on a given stock. Although there have been several high profile failed hedge fund picks, the consensus picks among hedge fund investors have historically outperformed the market after adjusting for known risk attributes. It’s not surprising given that hedge funds have access to better information and more resources to predict the winners in the stock market.
Is Wausau Paper Corp. (NYSE:WPP) undervalued? Hedge funds are taking an optimistic view. The number of bullish hedge fund bets moved up by 4 in recent months. Our calculations also showed that WPP isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video below for Q3 rankings).
In the financial world there are a lot of tools stock traders employ to analyze their stock investments. Some of the most useful tools are hedge fund and insider trading signals. We have shown that, historically, those who follow the best picks of the best hedge fund managers can outclass the S&P 500 by a significant amount (see the details here).
Jim Simons of Renaissance Technologies
We leave no stone unturned when looking for the next great investment idea. For example we recently identified a stock that trades 25% below the net cash on its balance sheet. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences, and go through short-term trade recommendations like this one. We even check out the recommendations of services with hard to believe track records. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind we’re going to go over the key hedge fund action regarding Wausau Paper Corp. (NYSE:WPP).
What does smart money think about Wausau Paper Corp. (NYSE:WPP)?
At the end of the fourth quarter, a total of 7 of the hedge funds tracked by Insider Monkey were long this stock, a change of 133% from one quarter earlier. On the other hand, there were a total of 11 hedge funds with a bullish position in WPP a year ago. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Wausau Paper Corp. (NYSE:WPP) was held by Renaissance Technologies, which reported holding $41.8 million worth of stock at the end of September. It was followed by Two Sigma Advisors with a $3.3 million position. Other investors bullish on the company included Citadel Investment Group, Millennium Management, and Arrowstreet Capital. In terms of the portfolio weights assigned to each position Renaissance Technologies allocated the biggest weight to Wausau Paper Corp. (NYSE:WPP), around 0.03% of its 13F portfolio. Two Sigma Advisors is also relatively very bullish on the stock, earmarking 0.01 percent of its 13F equity portfolio to WPP.
As one would reasonably expect, key money managers have been driving this bullishness. Millennium Management, managed by Israel Englander, created the largest position in Wausau Paper Corp. (NYSE:WPP). Millennium Management had $1.2 million invested in the company at the end of the quarter. Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital also initiated a $0.9 million position during the quarter. The other funds with brand new WPP positions are D. E. Shaw’s D E Shaw and Donald Sussman’s Paloma Partners.
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Wausau Paper Corp. (NYSE:WPP) but similarly valued. We will take a look at Citizens Financial Group Inc (NYSE:CFG), Omnicom Group Inc. (NYSE:OMC), Concho Resources Inc. (NYSE:CXO), and Amcor plc (NYSE:AMCR). This group of stocks’ market values are similar to WPP’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| CFG | 42 | 1814103 | -1 |
| OMC | 22 | 480889 | -5 |
| CXO | 39 | 763574 | 9 |
| AMCR | 10 | 48071 | -7 |
| Average | 28.25 | 776659 | -1 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 28.25 hedge funds with bullish positions and the average amount invested in these stocks was $777 million. That figure was $50 million in WPP’s case. Citizens Financial Group Inc (NYSE:CFG) is the most popular stock in this table. On the other hand Amcor plc (NYSE:AMCR) is the least popular one with only 10 bullish hedge fund positions. Compared to these stocks Wausau Paper Corp. (NYSE:WPP) is even less popular than AMCR. Hedge funds dodged a bullet by taking a bearish stance towards WPP. Our calculations showed that the top 20 most popular hedge fund stocks returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks lost 22.3% in 2020 through March 16th but managed to beat the market by 3.2 percentage points. Unfortunately WPP wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); WPP investors were disappointed as the stock returned -57.2% during the same time period and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as most of these stocks already outperformed the market so far in Q1.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.
