Wells Fargo is bullish on World Wrestling Entertainment, Inc. (NYSE:WWE). The financial giant initiated coverage on the wresting entertainment company this morning with a rating of “Outperform” and a price target range of $22 to $24, representing a 41.21% to 54.04% upside to the stock’s closing price of $15.58 per share yesterday. Key in Wells Fargo’s thesis for its bullish position on World Wrestling Entertainment is how underrated the company’s video streaming service WWE Network is by investors and the market. Wells Fargo notes that WWE was the first content company to launch an over-the-top streaming service, in February 2014 with the WWE Network, although the service underwhelmed Wall Street by missing its one million subscriber target by the end of 2014. However, Wells Fargo says that “sentiment turned this year”, thanks in part to 1.33 million subscriptions for WrestleMania 31 late in March, one of the most critically acclaimed WrestleManias in recent memory. The financial firm notes that the stock is up by 26% year-to-date and it thinks investors are still not giving WWE “enough credit for the substantial upside from here”. The stock jumped to as high as $16.31 per share early today or 4.69% higher than its closing price yesterday.
As Wells Fargo has proclaimed its confidence in World Wrestling Entertainment, Inc. (NYSE:WWE), so have prominent investors by the end of the first quarter. The number of bullish hedge fund positions moved up by 27% at the end of said period to 14 compared to the 11 hedge funds in our database with WWE positions at the end of 2014. The total value of holdings mirrored that increase with a jump of 26.93% to $81.91 million by the end of March from $64.53 million at the end of December. This is a substantial increase, as the stock only appreciated by 13.53% from the start of January to the end of March. It also appears that the smart money was right, as the stock has gained another 17.77% from the start of April through the end of June.
Hedge funds and other big money managers tend to have the largest amounts of their capital invested in large and mega-cap stocks because these companies allow for much greater capital allocation. That’s why if we take a look at the most popular stocks among funds, we won’t find any mid- or small-cap stocks like World Wrestling Entertainment, Inc. (NYSE:WWE) there. However, our backtests of hedge funds’ equity portfolios between 1999 and 2012 revealed that the 50 most popular stocks among hedge funds underperformed the market by seven basis points per month, showing that their most popular picks and the ones that received the bulk of their capital were not actually their best picks. On the other hand, their top small-cap picks performed considerably better, outperforming the market by 95 basis points per month. This was confirmed through backtesting and in forward tests of our small-cap strategy since August 2012. The strategy, which involves imitating the 15 most popular small-cap picks among hedge funds has provided gains of more than 135%, beating the broader market by over 80 percentage points through the end of April (see the details).
Another area Insider Monkey follows is insider trades. These transactions can tell people whether certain key insiders of companies are betting on their stocks. For World Wrestling Entertainment, there were no share purchases within this year by insiders. The last sales were by Executive Producer Kevin Dunn on February 25, of 40,000 shares, and by President Michael Luisi on February 24, of 15,000 shares. Taking these into account, we’re going to look at the hedge fund action regarding World Wrestling Entertainment, Inc.
How are hedge funds trading World Wrestling Entertainment, Inc. (NYSE:WWE)?
When looking at the hedgies followed by Insider Monkey, Eminence Capital, managed by Ricky Sandler, holds the number one position in World Wrestling Entertainment, Inc. (NYSE:WWE). Eminence Capital has a $45.9 million position in the stock of 3.28 million shares, comprising 0.7% of its 13F portfolio. Sitting at the number two spot is Mario Cibelli of Marathon Partners, with a $17.7 million position in 1.26 million shares; 7.2% of its 13F portfolio is allocated to the stock. Some other hedgies that are bullish encompass Andrew Sandler’s Sandler Capital Management, Michael Zimmerman’s Prentice Capital Management, and Neil Chriss’ Hutchin Hill Capital.
With a general bullishness amongst the heavyweights, specific money managers have been driving this bullishness. The previously mentioned Sandler Capital Management headed by Andrew Sandler, initiated the most outsized position in World Wrestling Entertainment, Inc. (NYSE:WWE) by the end of March, with a $3.6 million holding of 260,240 shares of the company. Michael Zimmerman’s Prentice Capital Management also initiated a $3.1 million position during the quarter, buying 218,499 shares. The following funds were also among the new WWE investors: Neil Chriss’ Hutchin Hill Capital, Matthew Hulsizer’s PEAK6 Capital Management, and Mike Vranos’ Ellington.
World Wrestling Entertainment, Inc. (NYSE:WWE) appears to be a good stock to buy at the moment, taking into account how bullish hedge funds and Wells Fargo are on the stock and the continuing strength of the brand around the world.
Disclosure: None
