Hedge funds are not perfect. They have their bad picks just like everyone else. Facebook, a stock hedge funds have loved, lost a third of its value since the end of July. Although hedge funds are not perfect, their consensus picks do deliver solid returns, however. Our data show the top 30 S&P 500 stocks among hedge funds at the end of September 2018 yielded an average return of 6.7% year-to-date, vs. a gain of 2.6% for the S&P 500 Index. Because hedge funds have a lot of resources and their consensus picks do well, we pay attention to what they think. In this article, we analyze what the elite funds think of Worldpay, Inc. (NYSE:WP).
Worldpay, Inc. (NYSE:WP) was in 60 hedge funds’ portfolios at the end of September. WP investors should pay attention to an increase in hedge fund interest in recent months. There were 46 hedge funds in our database with WP holdings at the end of the previous quarter. Our calculations also showed that WP isn’t among the 30 most popular stocks among hedge funds.
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 the 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 18 percentage points since May 2014 through December 3, 2018 (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.
We’re going to take a peek at the recent hedge fund action surrounding Worldpay, Inc. (NYSE:WP).
What have hedge funds been doing with Worldpay, Inc. (NYSE:WP)?
Heading into the fourth quarter of 2018, a total of 60 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 30% from the second quarter of 2018. By comparison, 46 hedge funds held shares or bullish call options in WP heading into this year. With the smart money’s sentiment swirling, there exists an “upper tier” of key hedge fund managers who were upping their holdings considerably (or already accumulated large positions).
Among these funds, Diamond Hill Capital held the most valuable stake in Worldpay, Inc. (NYSE:WP), which was worth $362.2 million at the end of the third quarter. On the second spot was Citadel Investment Group which amassed $315.1 million worth of shares. Moreover, Third Point, Egerton Capital Limited, and Steadfast Capital Management were also bullish on Worldpay, Inc. (NYSE:WP), allocating a large percentage of their portfolios to this stock.
As aggregate interest increased, specific money managers were leading the bulls’ herd. Glenview Capital, managed by Larry Robbins, established the most valuable position in Worldpay, Inc. (NYSE:WP). Glenview Capital had $93.6 million invested in the company at the end of the quarter. Gabriel Plotkin’s Melvin Capital Management also made a $78.5 million investment in the stock during the quarter. The other funds with new positions in the stock are Alexander Mitchell’s Scopus Asset Management, Doug Gordon, Jon Hilsabeck and Don Jabro’s Shellback Capital, and Amish Mehta’s SQN Investors.
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Worldpay, Inc. (NYSE:WP) but similarly valued. We will take a look at Fresenius Medical Care AG & Co. KGaA (NYSE:FMS), Align Technology, Inc. (NASDAQ:ALGN), ArcelorMittal (NYSE:MT), and Nokia Corporation (NYSE:NOK). This group of stocks’ market valuations are closest to WP’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| FMS | 6 | 26587 | -1 |
| ALGN | 37 | 2166489 | 1 |
| MT | 14 | 179765 | -2 |
| NOK | 19 | 520867 | 5 |
| Average | 19 | 723 | 0.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 19 hedge funds with bullish positions and the average amount invested in these stocks was $723 million. That figure was $3.56 billion in WP’s case. Align Technology, Inc. (NASDAQ:ALGN) is the most popular stock in this table. On the other hand Fresenius Medical Care AG & Co. KGaA (NYSE:FMS) is the least popular one with only 6 bullish hedge fund positions. Compared to these stocks Worldpay, Inc. (NYSE:WP) is more popular among hedge funds. Considering that hedge funds are fond of this stock in relation to its market cap peers, it may be a good idea to analyze it in detail and potentially include it in your portfolio.
Disclosure: None. This article was originally published at Insider Monkey.
