2019 Review: Most Favored Hedge Fund Stocks vs. WW International, Inc. (WW)

It has been a fantastic year for equity investors as Donald Trump pressured Federal Reserve to reduce interest rates and finalized the first leg of a trade deal with China. If you were a passive index fund investor, you had seen gains of 31% in your equity portfolio in 2019. However, if you were an active investor putting your money into hedge funds’ favorite stocks, you had seen gains of more than 41%. In this article we are going to take a look at how hedge funds feel about a stock like WW International, Inc. (NASDAQ:WW) and compare its performance against hedge funds’ favorite stocks.

WW International, Inc. (NASDAQ:WW) investors should be aware of an increase in support from the world’s most elite money managers of late. WW was in 28 hedge funds’ portfolios at the end of September. There were 21 hedge funds in our database with WW holdings at the end of the previous quarter. Our calculations also showed that WW isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video at the end of this article for Q2 rankings).

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’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the Russell 2000 ETFs by 40 percentage points since May 2014 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 27.8% through November 21, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Ricky Sandler of Eminence Capital

We leave no stone unturned when looking for the next great investment idea. For example one of the most bullish analysts in America just put his money where his mouth is. He says, “I’m investing more today than I did back in early 2009.” So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. This December, we recommended Adams Energy as a one-way bet based on an under-the-radar fund manager’s investor letter and the stock is still extremely cheap despite already gaining 20 percent. With all of this in mind let’s take a look at the latest hedge fund action encompassing WW International, Inc. (NASDAQ:WW).

What have hedge funds been doing with WW International, Inc. (NASDAQ:WW)?

At Q3’s end, a total of 28 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 33% from the previous quarter. On the other hand, there were a total of 31 hedge funds with a bullish position in WW a year ago. So, let’s see 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, Ricky Sandler’s Eminence Capital has the biggest position in WW International, Inc. (NASDAQ:WW), worth close to $162.6 million, amounting to 2% of its total 13F portfolio. Coming in second is Empyrean Capital Partners, managed by Michael A. Price and Amos Meron, which holds a $79.3 million position; the fund has 4.1% of its 13F portfolio invested in the stock. Some other members of the smart money with similar optimism include David E. Shaw’s D E Shaw, Cliff Asness’s AQR Capital Management and Ken Griffin’s Citadel Investment Group. In terms of the portfolio weights assigned to each position Stadium Capital Management allocated the biggest weight to WW International, Inc. (NASDAQ:WW), around 7.35% of its 13F portfolio. Empyrean Capital Partners is also relatively very bullish on the stock, earmarking 4.13 percent of its 13F equity portfolio to WW.

As aggregate interest increased, some big names have jumped into WW International, Inc. (NASDAQ:WW) headfirst. Eminence Capital, managed by Ricky Sandler, initiated the most outsized position in WW International, Inc. (NASDAQ:WW). Eminence Capital had $162.6 million invested in the company at the end of the quarter. Michael A. Price and Amos Meron’s Empyrean Capital Partners also initiated a $79.3 million position during the quarter. The other funds with new positions in the stock are David E. Shaw’s D E Shaw, Cliff Asness’s AQR Capital Management, and Ken Griffin’s Citadel Investment Group.

Let’s now take a look at hedge fund activity in other stocks similar to WW International, Inc. (NASDAQ:WW). These stocks are Quidel Corporation (NASDAQ:QDEL), International Bancshares Corporation (NASDAQ:IBOC), Rogers Corporation (NYSE:ROG), and Inovalon Holdings Inc (NASDAQ:INOV). This group of stocks’ market caps match WW’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
QDEL 14 77704 0
IBOC 16 161597 -2
ROG 19 73962 0
INOV 11 21045 4
Average 15 83577 0.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 15 hedge funds with bullish positions and the average amount invested in these stocks was $84 million. That figure was $537 million in WW’s case. Rogers Corporation (NYSE:ROG) is the most popular stock in this table. On the other hand Inovalon Holdings Inc (NASDAQ:INOV) is the least popular one with only 11 bullish hedge fund positions. Compared to these stocks WW International, Inc. (NASDAQ:WW) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.1% in 2019 through December 23rd and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. Unfortunately WW wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on WW were disappointed as the stock returned 9.4% so far in 2019 (through 12/23) and trailed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as 65 percent of these stocks already outperformed the market in 2019.
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

Disclosure: None. This article was originally published at Insider Monkey.