Hedge funds run by legendary names like George Soros and David Tepper make billions of dollars a year for themselves and their super-rich accredited investors (you’ve got to have a minimum of $1 million liquid to invest in a hedge fund) by spending enormous resources on analyzing and uncovering data about small-cap stocks that the big brokerage houses don’t follow. Small caps are where they can generate significant outperformance. That’s why we pay special attention to hedge fund activity in these stocks.
Is Wix.Com Ltd (NASDAQ:WIX) a good investment now? The smart money is becoming more confident. The number of bullish hedge fund positions rose by 3 lately. Our calculations also showed that WIX isn’t among the 30 most popular stocks among hedge funds. WIX was in 27 hedge funds’ portfolios at the end of December. There were 24 hedge funds in our database with WIX positions at the end of the previous quarter.
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 market by 32 percentage points since May 2014 through March 12, 2019 (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.
Let’s take a look at the key hedge fund action encompassing Wix.Com Ltd (NASDAQ:WIX).
How have hedgies been trading Wix.Com Ltd (NASDAQ:WIX)?
At Q4’s end, a total of 27 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 13% from one quarter earlier. By comparison, 16 hedge funds held shares or bullish call options in WIX a year ago. With hedge funds’ sentiment swirling, there exists an “upper tier” of notable hedge fund managers who were boosting their holdings meaningfully (or already accumulated large positions).
More specifically, Steadfast Capital Management was the largest shareholder of Wix.Com Ltd (NASDAQ:WIX), with a stake worth $203.1 million reported as of the end of September. Trailing Steadfast Capital Management was Renaissance Technologies, which amassed a stake valued at $157.2 million. Sylebra Capital Management, SQN Investors, and Two Sigma Advisors were also very fond of the stock, giving the stock large weights in their portfolios.
With a general bullishness amongst the heavyweights, some big names have been driving this bullishness. Hunt Lane Capital, managed by Dennis Puri and Oliver Keller, assembled the biggest position in Wix.Com Ltd (NASDAQ:WIX). Hunt Lane Capital had $15.8 million invested in the company at the end of the quarter. Steve Cohen’s Point72 Asset Management also initiated a $15 million position during the quarter. The other funds with new positions in the stock are Michael Kahan and Jeremy Kahan’s North Peak Capital, Robert Henry Lynch’s Aristeia Capital, and Minhua Zhang’s Weld Capital Management.
Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Wix.Com Ltd (NASDAQ:WIX) but similarly valued. These stocks are Transocean Ltd (NYSE:RIG), ITT Inc. (NYSE:ITT), Penumbra Inc (NYSE:PEN), and Texas Pacific Land Trust (NYSE:TPL). All of these stocks’ market caps are similar to WIX’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| RIG | 33 | 755414 | -9 |
| ITT | 25 | 308324 | 6 |
| PEN | 18 | 231703 | -7 |
| TPL | 13 | 1041180 | 2 |
| Average | 22.25 | 584155 | -2 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 22.25 hedge funds with bullish positions and the average amount invested in these stocks was $584 million. That figure was $656 million in WIX’s case. Transocean Ltd (NYSE:RIG) is the most popular stock in this table. On the other hand Texas Pacific Land Trust (NYSE:TPL) is the least popular one with only 13 bullish hedge fund positions. Wix.Com Ltd (NASDAQ:WIX) is not the most popular stock in this group but hedge fund interest is still above average. Our calculations showed that top 15 most popular stocks) among hedge funds returned 24.2% through April 22nd and outperformed the S&P 500 ETF (SPY) by more than 7 percentage points. Hedge funds were also right about betting on WIX as the stock returned 39.1% and outperformed the market by an even larger margin. Hedge funds were rewarded for their relative bullishness.
Disclosure: None. This article was originally published at Insider Monkey.
