Were Hedge Funds Right About WisdomTree Investments, Inc. (WETF)?

Last year we predicted the arrival of the first US recession since 2009 and we told in advance that the market will decline by at least 20% in (Recession is Imminent: We Need A Travel Ban NOW). In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. In this article, we will take a closer look at hedge fund sentiment towards WisdomTree Investments, Inc. (NASDAQ:WETF).

WisdomTree Investments, Inc. (NASDAQ:WETF) was in 18 hedge funds’ portfolios at the end of March. The all time high for this statistic is 22. WETF has experienced an increase in activity from the world’s largest hedge funds lately. There were 17 hedge funds in our database with WETF holdings at the end of December. Our calculations also showed that WETF isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings).

So, why do we pay attention to hedge fund sentiment before making any investment decisions? 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 more than 115 percentage points since March 2017 (see the details here). We have been able to outperform the passive index funds by tracking the moves of corporate insiders and hedge funds, and we believe small investors can benefit a lot from reading hedge fund investor letters and 13F filings.

Bruce Kovner of Caxton Associates LP

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, pet market is growing at a 7% annual rate and is expected to reach $110 billion in 2021. So, we are checking out the 5 best stocks for animal lovers. We go through lists like the 15 best Jim Cramer stocks to identify the next Tesla that will deliver outsized returns. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our homepage. Keeping this in mind we’re going to take a gander at the key hedge fund action surrounding WisdomTree Investments, Inc. (NASDAQ:WETF).

Do Hedge Funds Think WETF Is A Good Stock To Buy Now?

At Q1’s end, a total of 18 of the hedge funds tracked by Insider Monkey were long this stock, a change of 6% from the fourth quarter of 2020. The graph below displays the number of hedge funds with bullish position in WETF over the last 23 quarters. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Azora Capital, managed by Ravi Chopra, holds the largest position in WisdomTree Investments, Inc. (NASDAQ:WETF). Azora Capital has a $24.7 million position in the stock, comprising 3.1% of its 13F portfolio. Sitting at the No. 2 spot is Renaissance Technologies, which holds a $13.9 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Remaining professional money managers that hold long positions comprise Ken Fisher’s Fisher Asset Management, Daniel Johnson’s Gillson Capital and Ryan Tolkin (CIO)’s Schonfeld Strategic Advisors. In terms of the portfolio weights assigned to each position Azora Capital allocated the biggest weight to WisdomTree Investments, Inc. (NASDAQ:WETF), around 3.09% of its 13F portfolio. Diametric Capital is also relatively very bullish on the stock, earmarking 1.89 percent of its 13F equity portfolio to WETF.

Now, key money managers were breaking ground themselves. Interval Partners, managed by Gregg Moskowitz, assembled the largest position in WisdomTree Investments, Inc. (NASDAQ:WETF). Interval Partners had $0.9 million invested in the company at the end of the quarter. Bruce Kovner’s Caxton Associates LP also made a $0.3 million investment in the stock during the quarter. The other funds with new positions in the stock are Matthew Hulsizer’s PEAK6 Capital Management, Dmitry Balyasny’s Balyasny Asset Management, and Ken Griffin’s Citadel Investment Group.

Let’s also examine hedge fund activity in other stocks similar to WisdomTree Investments, Inc. (NASDAQ:WETF). We will take a look at BellRing Brands, Inc. (NYSE:BRBR), Standard Motor Products, Inc. (NYSE:SMP), Smith & Wesson Brands, Inc. (NASDAQ:SWBI), ARMOUR Residential REIT, Inc. (NYSE:ARR), Federal Agricultural Mortgage Corp. (NYSE:AGM), Suburban Propane Partners LP (NYSE:SPH), and RPT Realty (NYSE:RPT). All of these stocks’ market caps resemble WETF’s market cap.

View table here if you experience formatting issues.

As you can see these stocks had an average of 10.4 hedge funds with bullish positions and the average amount invested in these stocks was $60 million. That figure was $73 million in WETF’s case. Smith & Wesson Brands, Inc. (NASDAQ:SWBI) is the most popular stock in this table. On the other hand Suburban Propane Partners LP (NYSE:SPH) is the least popular one with only 2 bullish hedge fund positions. WisdomTree Investments, Inc. (NASDAQ:WETF) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for WETF is 80.5. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 28.5% in 2021 through July 23rd and beat the market again by 10.1 percentage points. Unfortunately WETF wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on WETF were disappointed as the stock returned -6% since the end of March (through 7/23) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as many of these stocks already outperformed the market since 2019.

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

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