How WCI Communities Inc (WCIC) Stacks Up Against Its Peers

You probably know from experience that there is not as much information on small-cap companies as there is on large companies. Of course, this makes it really hard and difficult for individual investors to make proper and accurate analysis of certain small-cap companies. However, well-known and successful hedge fund investors like Carl Icahn and George Soros hold the necessary resources and abilities to conduct an extensive stock analysis on small-cap stocks, which enable them to make millions of dollars by identifying potential winners within the small-cap galaxy of stocks. This represents the main reason why Insider Monkey takes notice of the hedge fund activity in these overlooked stocks.

WCI Communities Inc (NYSE:WCIC) has seen an increase in activity from the world’s largest hedge funds recently. WCIC was in 14 hedge funds’ portfolios at the end of the third quarter of 2016. There were 12 hedge funds in our database with WCIC positions 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 Francesca’s Holdings Corp (NASDAQ:FRAN), Almost Family, Inc. (NASDAQ:AFAM), and Dorchester Minerals LP (NASDAQ:DMLP) to gather more data points.

At Insider Monkey, we’ve developed an investment strategy that has delivered market-beating returns over the past 12 months. Our strategy identifies the 100 best-performing funds of the previous quarter from among the collection of 700+ successful funds that we track in our database, which we accomplish using our returns methodology. We then study the portfolios of those 100 funds using the latest 13F data to uncover the 30 most popular mid-cap stocks (market caps of between $1 billion and $10 billion) among them to hold until the next filing period. This strategy delivered 18% gains over the past 12 months, more than doubling the 8% returns enjoyed by the S&P 500 ETFs.

What have hedge funds been doing with WCI Communities Inc (NYSE:WCIC)?

At Q3’s end, a total of 14 of the hedge funds tracked by Insider Monkey held long positions in this stock, a 17% uptick from the previous quarter. On the other hand, 20 hedge funds held shares or bullish call options in WCIC heading into this year, so hedge fund ownership is still down sharply in 2016. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Michael Weinstock’s Monarch Alternative Capital has the biggest position in WCI Communities Inc (NYSE:WCIC), worth close to $56.3 million, corresponding to 51.8% of its total 13F portfolio. The second most bullish fund manager is Third Avenue Management, led by Martin Whitman, holding a $12.5 million position. Some other members of the smart money with similar optimism comprise Robert Hockett’s Covalent Capital Partners, David Keidan’s Buckingham Capital Management, and Glenn Russell Dubin’s Highbridge Capital Management. 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, key money managers have jumped into WCI Communities Inc (NYSE:WCIC) headfirst. Highbridge Capital Management established the most outsized position in WCI Communities Inc (NYSE:WCIC). Highbridge Capital Management had $7.4 million invested in the company at the end of the quarter. Simon Davies’ Sand Grove Capital Partners also initiated a $7.1 million position during the quarter. The other funds with new positions in the stock are Clint Carlson’s Carlson Capital, Matthew Halbower’s Pentwater Capital Management, and John Paulson’s Paulson & Co.

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as WCI Communities Inc (NYSE:WCIC) but similarly valued. These stocks are Francesca’s Holdings Corp (NASDAQ:FRAN), Almost Family, Inc. (NASDAQ:AFAM), Dorchester Minerals LP (NASDAQ:DMLP), and Lindblad Expeditions Holdings Inc (NASDAQ:LIND). This group of stocks’ market caps are closest to WCIC’s market cap.

As you can see these stocks had an average of 14 hedge funds with bullish positions and the average amount invested in these stocks was $58 million. That figure was $120 million in WCIC’s case. Francesca’s Holdings Corp (NASDAQ:FRAN) is the most popular stock in this table. On the other hand Dorchester Minerals LP (NASDAQ:DMLP) is the least popular one with only 4 bullish hedge fund positions. WCI Communities Inc (NYSE:WCIC) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. In this regard FRAN might be a better candidate to consider taking a long position in.

Disclosure: None