Is Worldpay, Inc. (NYSE:WP) a healthy stock for your portfolio? Money managers are selling. The number of bullish hedge fund positions shrunk by 12 lately. Our calculations also showed that WP isn’t among the 30 most popular stocks among hedge funds. WP was in 48 hedge funds’ portfolios at the end of December. There were 60 hedge funds in our database with WP holdings at the end of the previous quarter.
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 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 32 percentage points since May 2014 through March 12, 2019 (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 gander at the new hedge fund action encompassing Worldpay, Inc. (NYSE:WP).
How are hedge funds trading Worldpay, Inc. (NYSE:WP)?
At Q4’s end, a total of 48 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -20% from one quarter earlier. By comparison, 45 hedge funds held shares or bullish call options in WP a year ago. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Worldpay, Inc. (NYSE:WP) was held by Select Equity Group, which reported holding $398.8 million worth of stock at the end of September. It was followed by Diamond Hill Capital with a $321.3 million position. Other investors bullish on the company included Citadel Investment Group, Third Point, and Steadfast Capital Management.
Judging by the fact that Worldpay, Inc. (NYSE:WP) has experienced falling interest from the smart money, we can see that there were a few funds that slashed their full holdings in the third quarter. Intriguingly, John Armitage’s Egerton Capital Limited dumped the biggest stake of the “upper crust” of funds tracked by Insider Monkey, totaling an estimated $283.7 million in stock, and Larry Robbins’s Glenview Capital was right behind this move, as the fund cut about $93.6 million worth. These moves are intriguing to say the least, as total hedge fund interest dropped by 12 funds in the third quarter.
Let’s now take a look at hedge fund activity in other stocks similar to Worldpay, Inc. (NYSE:WP). We will take a look at Electronic Arts Inc. (NASDAQ:EA), Consolidated Edison, Inc. (NYSE:ED), Southern Copper Corporation (NYSE:SCCO), and Centene Corp (NYSE:CNC). This group of stocks’ market values match WP’s market value.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
View table here if you experience formatting issues.
As you can see these stocks had an average of 37.75 hedge funds with bullish positions and the average amount invested in these stocks was $1351 million. That figure was $2362 million in WP’s case. Electronic Arts Inc. (NASDAQ:EA) is the most popular stock in this table. On the other hand Southern Copper Corporation (NYSE:SCCO) is the least popular one with only 15 bullish hedge fund positions. Worldpay, Inc. (NYSE:WP) 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.Our calculations showed that top 15 most popular stocks among hedge funds returned 19.7% through March 15th and outperformed the S&P 500 ETF (SPY) by 6.6 percentage points. A few hedge funds were also right about betting on Worldpay as the stock returned 29.1% and outperformed the market as well.
Disclosure: None. This article was originally published at Insider Monkey.