How do you pick the next stock to invest in? One way would be to spend days of research browsing through thousands of publicly traded companies. However, an easier way is to look at the stocks that smart money investors are collectively bullish on. Hedge funds and other institutional investors usually invest large amounts of capital and have to conduct due diligence while choosing their next pick. They don’t always get it right, but, on average, their stock picks historically generated strong returns after adjusting for known risk factors. With this in mind, let’s take a look at the recent hedge fund activity surrounding Wingstop Inc (NASDAQ:WING).
Is Wingstop Inc (NASDAQ:WING) the right investment to pursue these days? The smart money was getting less bullish. The number of bullish hedge fund positions decreased by 1 recently. Wingstop Inc (NASDAQ:WING) was in 23 hedge funds’ portfolios at the end of September. The all time high for this statistic is 32. Our calculations also showed that WING isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings). There were 24 hedge funds in our database with WING positions at the end of the second quarter.
Ken Griffin of Citadel Investment Group
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium prices have more than doubled over the past year, so we go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. Keeping this in mind we’re going to review the recent hedge fund action regarding Wingstop Inc (NASDAQ:WING).
Do Hedge Funds Think WING Is A Good Stock To Buy Now?
At third quarter’s end, a total of 23 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -4% from one quarter earlier. By comparison, 32 hedge funds held shares or bullish call options in WING a year ago. With hedge funds’ capital changing hands, there exists a few noteworthy hedge fund managers who were upping their holdings substantially (or already accumulated large positions).
When looking at the institutional investors followed by Insider Monkey, Terry Smith’s Fundsmith LLP has the largest position in Wingstop Inc (NASDAQ:WING), worth close to $92.3 million, corresponding to 0.3% of its total 13F portfolio. The second largest stake is held by Tremblant Capital, managed by Brett Barakett, which holds a $51.8 million position; 1.6% of its 13F portfolio is allocated to the stock. Some other professional money managers that hold long positions encompass John Osterweis’s Osterweis Capital Management, Israel Englander’s Millennium Management and Ken Griffin’s Citadel Investment Group. In terms of the portfolio weights assigned to each position Tremblant Capital allocated the biggest weight to Wingstop Inc (NASDAQ:WING), around 1.64% of its 13F portfolio. Osterweis Capital Management is also relatively very bullish on the stock, setting aside 0.61 percent of its 13F equity portfolio to WING.
Since Wingstop Inc (NASDAQ:WING) has witnessed declining sentiment from the entirety of the hedge funds we track, it’s safe to say that there is a sect of hedgies who were dropping their entire stakes in the third quarter. At the top of the heap, Li Ran’s Half Sky Capital dumped the largest stake of the 750 funds watched by Insider Monkey, comprising an estimated $9.7 million in stock, and D. E. Shaw’s D E Shaw was right behind this move, as the fund said goodbye to about $0.8 million worth. These moves are important to note, as total hedge fund interest dropped by 1 funds in the third quarter.
Let’s check out hedge fund activity in other stocks similar to Wingstop Inc (NASDAQ:WING). These stocks are Nomad Foods Limited (NYSE:NOMD), Select Medical Holdings Corporation (NYSE:SEM), Amedisys Inc (NASDAQ:AMED), JetBlue Airways Corporation (NASDAQ:JBLU), Herc Holdings Inc. (NYSE:HRI), The Howard Hughes Corporation (NYSE:HHC), and Companhia de Saneamento Basico (NYSE:SBS). All of these stocks’ market caps resemble WING’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| NOMD | 23 | 272138 | -3 |
| SEM | 22 | 228726 | -2 |
| AMED | 25 | 271359 | -1 |
| JBLU | 31 | 370640 | 1 |
| HRI | 24 | 1535284 | 4 |
| HHC | 25 | 1469334 | 0 |
| SBS | 6 | 250306 | -5 |
| Average | 22.3 | 628255 | -0.9 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 22.3 hedge funds with bullish positions and the average amount invested in these stocks was $628 million. That figure was $213 million in WING’s case. JetBlue Airways Corporation (NASDAQ:JBLU) is the most popular stock in this table. On the other hand Companhia de Saneamento Basico (NYSE:SBS) is the least popular one with only 6 bullish hedge fund positions. Wingstop Inc (NASDAQ:WING) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for WING is 59.6. 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 31.1% in 2021 through December 9th and beat the market again by 5.1 percentage points. Unfortunately WING wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on WING were disappointed as the stock returned 2.4% since the end of September (through 12/9) 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.
Follow Wingstop Inc. (NASDAQ:WING)
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Disclosure: None. This article was originally published at Insider Monkey.
