WisdomTree Investments, Inc. (WETF): Are Hedge Funds Right About This Stock?

WisdomTree Investments, Inc. (NASDAQ:WETF) shareholders have witnessed an increase in enthusiasm from smart money recently.

To most shareholders, hedge funds are seen as slow, outdated financial tools of the past. While there are greater than 8000 funds trading today, we choose to focus on the bigwigs of this group, about 450 funds. Most estimates calculate that this group controls most of all hedge funds’ total asset base, and by watching their highest performing picks, we have found a few investment strategies that have historically beaten the market. Our small-cap hedge fund strategy outpaced the S&P 500 index by 18 percentage points annually for a decade in our back tests, and since we’ve started sharing our picks with our subscribers at the end of August 2012, we have outpaced the S&P 500 index by 23.3 percentage points in 8 months (see all of our picks from August).

Equally as important, bullish insider trading sentiment is another way to parse down the marketplace. Just as you’d expect, there are many motivations for an executive to get rid of shares of his or her company, but just one, very obvious reason why they would behave bullishly. Various empirical studies have demonstrated the useful potential of this strategy if shareholders understand where to look (learn more here).

Now, we’re going to take a peek at the latest action regarding WisdomTree Investments, Inc. (NASDAQ:WETF).

How have hedgies been trading WisdomTree Investments, Inc. (NASDAQ:WETF)?

At the end of the first quarter, a total of 17 of the hedge funds we track held long positions in this stock, a change of 55% from the previous quarter. With the smart money’s capital changing hands, there exists an “upper tier” of noteworthy hedge fund managers who were increasing their stakes significantly.

When looking at the hedgies we track, Israel Englander’s Millennium Management had the biggest position in WisdomTree Investments, Inc. (NASDAQ:WETF), worth close to $21 million, accounting for 0.1% of its total 13F portfolio. Coming in second is Chuck Royce of Royce & Associates, with a $15.8 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Remaining peers with similar optimism include Ken Griffin’s Citadel Investment Group, Drew Cupps’s Cupps Capital Management and Robert Pohly’s Samlyn Capital.

As one would reasonably expect, some big names have jumped into WisdomTree Investments, Inc. (NASDAQ:WETF) headfirst. Cupps Capital Management, managed by Drew Cupps, assembled the largest position in WisdomTree Investments, Inc. (NASDAQ:WETF). Cupps Capital Management had 14.3 million invested in the company at the end of the quarter. Robert Pohly’s Samlyn Capital also initiated a $11.7 million position during the quarter. The following funds were also among the new WETF investors: Ken Heebner’s Capital Growth Management, Robert B. Gillam’s McKinley Capital Management, and SAC Subsidiary’s CR Intrinsic Investors.

What have insiders been doing with WisdomTree Investments, Inc. (NASDAQ:WETF)?

Insider trading activity, especially when it’s bullish, is at its handiest when the company we’re looking at has seen transactions within the past six months. Over the last six-month time frame, WisdomTree Investments, Inc. (NASDAQ:WETF) has experienced zero unique insiders purchasing, and 11 insider sales (see the details of insider trades here).

Let’s also review hedge fund and insider activity in other stocks similar to WisdomTree Investments, Inc. (NASDAQ:WETF). These stocks are Financial Engines Inc (NASDAQ:FNGN), Cohen & Steers, Inc. (NYSE:CNS), Virtus Investment Partners Inc (NASDAQ:VRTS), Gamco Investors Inc. (NYSE:GBL), and Evercore Partners Inc. (NYSE:EVR). This group of stocks are the members of the asset management industry and their market caps resemble WETF’s market cap.

With the returns shown by our time-tested strategies, everyday investors must always watch hedge fund and insider trading activity, and WisdomTree Investments, Inc. (NASDAQ:WETF) applies perfectly to this mantra.

Click here to learn why you should track hedge funds