Is The Wet Seal, Inc. (NASDAQ:WTSL) undervalued? The smart money is taking a bullish view. The number of bullish hedge fund bets improved by 2 in recent months.
According to most traders, hedge funds are assumed to be slow, old investment vehicles of years past. While there are over 8000 funds with their doors open at present, we choose to focus on the bigwigs of this club, around 450 funds. It is estimated that this group controls most of all hedge funds’ total asset base, and by keeping an eye on their top stock picks, we have identified a number of investment strategies that have historically outperformed the market. Our small-cap hedge fund strategy outperformed the S&P 500 index by 18 percentage points per year 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 beaten the S&P 500 index by 24 percentage points in 7 months (see the details here).
Just as integral, bullish insider trading sentiment is a second way to break down the marketplace. Just as you’d expect, there are many motivations for an executive to downsize shares of his or her company, but just one, very simple reason why they would behave bullishly. Several academic studies have demonstrated the useful potential of this method if investors know what to do (learn more here).
Consequently, we’re going to take a gander at the recent action encompassing The Wet Seal, Inc. (NASDAQ:WTSL).
Hedge fund activity in The Wet Seal, Inc. (NASDAQ:WTSL)
At the end of the fourth quarter, a total of 11 of the hedge funds we track were long in this stock, a change of 22% from the previous quarter. With hedge funds’ positions undergoing their usual ebb and flow, there exists a few key hedge fund managers who were boosting their stakes meaningfully.
When looking at the hedgies we track, AQR Capital Management, managed by Cliff Asness, holds the largest position in The Wet Seal, Inc. (NASDAQ:WTSL). AQR Capital Management has a $9.4 million position in the stock, comprising less than 0.1%% of its 13F portfolio. On AQR Capital Management’s heels is Jim Simons of Renaissance Technologies, with a $7.4 million position; less than 0.1%% of its 13F portfolio is allocated to the stock. Other peers with similar optimism include David Gallo’s Valinor Management LLC, Carl Tiedemann and Michael Tiedemann’s TIG Advisors and Chuck Royce’s Royce & Associates.
As one would reasonably expect, some big names were breaking ground themselves. Moore Global Investments, managed by Louis Bacon, assembled the most valuable position in The Wet Seal, Inc. (NASDAQ:WTSL). Moore Global Investments had 0.6 million invested in the company at the end of the quarter. Ken Griffin’s Citadel Investment Group also made a $0.1 million investment in the stock during the quarter. The only other fund with a new position in the stock is Paul Tudor Jones’s Tudor Investment Corp.
How have insiders been trading The Wet Seal, Inc. (NASDAQ:WTSL)?
Insider buying is at its handiest when the company we’re looking at has experienced transactions within the past six months. Over the latest half-year time frame, The Wet Seal, Inc. (NASDAQ:WTSL) has seen zero unique insiders purchasing, and zero insider sales (see the details of insider trades here).
Let’s also take a look at hedge fund and insider activity in other stocks similar to The Wet Seal, Inc. (NASDAQ:WTSL). These stocks are bebe stores, inc. (NASDAQ:BEBE), Destination Maternity Corp (NASDAQ:DEST), Christopher & Banks Corporation (NYSE:CBK), Destination XL Group Inc (NASDAQ:DXLG), and New York & Company, Inc. (NYSE:NWY). This group of stocks are in the apparel stores industry and their market caps are similar to WTSL’s market cap.