Do Hedge Funds Love John Wiley & Sons Inc (JW.A)?

The successful funds run by legendary investors such as Dan Loeb and David Tepper make hundreds of millions of dollars for themselves and their investors by spending enormous resources doing research on small cap stocks that big investment banks don’t follow. Because of their pay structures, they have strong incentive to do the research necessary to beat the market. That’s why we pay close attention to what they think in small cap stocks. In this article, we take a closer look at John Wiley & Sons Inc (NYSE:JW.A) from the perspective of those successful funds.

John Wiley & Sons Inc (NYSE:JW.A) was in 12 hedge funds’ portfolios at the end of September. JW.A has seen a decrease in hedge fund interest recently. There were 14 hedge funds in our database with JW.A holdings at the end of the previous quarter. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Nevro Corp (NYSE:NVRO), Telephone & Data Systems, Inc. (NYSE:TDS), and Intersil Corp (NASDAQ:ISIL) to gather more data points.

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We care about hedge fund sentiment because historically hedge funds’ stock picks delivered strong risk adjusted returns. There are certain segments of the market where hedge funds’ stock picks performed much better than its benchmarks. For instance, the 30 most popular mid-cap stocks among the best performing hedge funds returned 18% over the last 12 months outpacing S&P 500 Index by more than 10 percentage points. We developed this strategy 2.5 years ago and started sharing its picks in our quarterly newsletter. It bested the S&P 500 Index ETFs by delivering a solid 39% vs. 22% gain for its benchmarks.

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With all of this in mind, let’s take a look at the fresh action surrounding John Wiley & Sons Inc (NYSE:JW.A).

Hedge fund activity in John Wiley & Sons Inc (NYSE:JW.A)

At Q3’s end, a total of 12 of the hedge funds tracked by Insider Monkey held long positions in this stock, a drop of 14% from the second quarter of 2016. On the other hand, there were a total of 15 hedge funds with a bullish position in JW.A at the beginning of this year. With the smart money’s positions undergoing their usual ebb and flow, there exists a select group of key hedge fund managers who were boosting their holdings substantially (or already accumulated large positions).
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According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, AQR Capital Management, led by Cliff Asness, holds the largest position in John Wiley & Sons Inc (NYSE:JW.A). AQR Capital Management has a $38.7 million position in the stock, comprising 0.1% of its 13F portfolio. The second most bullish fund manager is Chuck Royce of Royce & Associates, with a $13.6 million position; 0.1% of its 13F portfolio is allocated to the stock. Some other peers that are bullish include Israel Englander’s Millennium Management, one of the 10 largest hedge funds in the world, John Overdeck and David Siegel’s Two Sigma Advisors and D. E. Shaw’s D E Shaw. We should note that none of these hedge funds are among our list of the 100 best performing hedge funds which is based on the performance of their 13F long positions in non-microcap stocks.

Now that we’ve mentioned the most bullish investors, let’s also take a look at some funds that cut their entire stakes in the stock during the third quarter. It’s worth mentioning that Glenn Russell Dubin’s Highbridge Capital Management cut the biggest stake of all the investors monitored by Insider Monkey, valued at close to $3.2 million in stock. Neil Chriss’ fund, Hutchin Hill Capital, also sold off its stock, about $1.7 million worth.

Let’s now review hedge fund activity in other stocks similar to John Wiley & Sons Inc (NYSE:JW.A). These stocks are Nevro Corp (NYSE:NVRO), Telephone & Data Systems, Inc. (NYSE:TDS), Intersil Corp (NASDAQ:ISIL), and Two Harbors Investment Corp (NYSE:TWO). This group of stocks’ market valuations are closest to JW’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
NVRO 33 391335 2
TDS 19 263313 -1
ISIL 30 318563 16
TWO 21 111088 3

As you can see these stocks had an average of 26 hedge funds with bullish positions and the average amount invested in these stocks was $271 million. That figure was $81 million in JW.A’s case. Nevro Corp (NYSE:NVRO) is the most popular stock in this table. On the other hand Telephone & Data Systems, Inc. (NYSE:TDS) is the least popular one with only 19 bullish hedge fund positions. Compared to these stocks John Wiley & Sons Inc (NYSE:JW.A) is even less popular than TDS. Considering that hedge funds aren’t fond of this stock in relation to other companies analyzed in this article, it may be a good idea to analyze it in detail and understand why the smart money isn’t behind this stock. This isn’t necessarily bad news. Although it is possible that hedge funds may think the stock is overpriced and view the stock as a short candidate, they may not be very familiar with the bullish thesis. In either case more research is warranted.

Disclosure: none