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Did Hedge Funds Make The Right Call On Winnebago Industries, Inc. (WGO) ?

The latest 13F reporting period has come and gone, and Insider Monkey have plowed through 821 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds’ and investors’ portfolio positions as of March 31st, a week after the market trough. Now, we are almost done with the second quarter. Investors decided to bet on the economic recovery and a stock market rebound. S&P 500 Index returned almost 20% this quarter. In this article you are going to find out whether hedge funds thoughtWinnebago Industries, Inc. (NYSE:WGO) was a good investment heading into the second quarter and how the stock traded in comparison to the top hedge fund picks.

Winnebago Industries, Inc. (NYSE:WGO) was in 19 hedge funds’ portfolios at the end of March. WGO has seen a decrease in enthusiasm from smart money recently. There were 23 hedge funds in our database with WGO positions at the end of the previous quarter. Our calculations also showed that WGO isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks).

Video: Watch our video about the top 5 most popular hedge fund stocks.

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 was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 58 percentage points since March 2017 (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 36% through May 18th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Chuck Royce

Chuck Royce of Royce & Associates

At Insider Monkey we scour multiple sources to uncover the next great investment idea. Cannabis stocks are roaring back in 2020, so we are checking out this under-the-radar stock. We go through lists like the 10 most profitable companies in the world to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. With all of this in mind we’re going to take a gander at the key hedge fund action regarding Winnebago Industries, Inc. (NYSE:WGO).

How are hedge funds trading Winnebago Industries, Inc. (NYSE:WGO)?

At Q1’s end, a total of 19 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -17% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in WGO over the last 18 quarters. With hedge funds’ capital changing hands, there exists a select group of notable hedge fund managers who were adding to their holdings meaningfully (or already accumulated large positions).

More specifically, Punch Card Capital was the largest shareholder of Winnebago Industries, Inc. (NYSE:WGO), with a stake worth $66.3 million reported as of the end of September. Trailing Punch Card Capital was Royce & Associates, which amassed a stake valued at $12.8 million. Millennium Management, Intrinsic Edge Capital, and Shellback Capital were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Punch Card Capital allocated the biggest weight to Winnebago Industries, Inc. (NYSE:WGO), around 33.44% of its 13F portfolio. Shellback Capital is also relatively very bullish on the stock, designating 1.5 percent of its 13F equity portfolio to WGO.

Because Winnebago Industries, Inc. (NYSE:WGO) has witnessed falling interest from the aggregate hedge fund industry, logic holds that there were a few money managers who sold off their positions entirely heading into Q4. Intriguingly, Jack Woodruff’s Candlestick Capital Management dropped the largest investment of the “upper crust” of funds followed by Insider Monkey, valued at close to $16.7 million in stock, and Brad Dunkley and Blair Levinsky’s Waratah Capital Advisors was right behind this move, as the fund dropped about $7.8 million worth. These moves are intriguing to say the least, as total hedge fund interest was cut by 4 funds heading into Q4.

Let’s now take a look at hedge fund activity in other stocks similar to Winnebago Industries, Inc. (NYSE:WGO). We will take a look at CareDx, Inc. (NASDAQ:CDNA), Cardlytics, Inc. (NASDAQ:CDLX), Standard Motor Products, Inc. (NYSE:SMP), and First Busey Corporation (NASDAQ:BUSE). This group of stocks’ market caps match WGO’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
CDNA 17 144703 -8
CDLX 26 292046 0
SMP 9 68050 -1
BUSE 11 27678 -1
Average 15.75 133119 -2.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 15.75 hedge funds with bullish positions and the average amount invested in these stocks was $133 million. That figure was $132 million in WGO’s case. Cardlytics, Inc. (NASDAQ:CDLX) is the most popular stock in this table. On the other hand Standard Motor Products, Inc. (NYSE:SMP) is the least popular one with only 9 bullish hedge fund positions. Winnebago Industries, Inc. (NYSE:WGO) is not the most popular stock in this group but hedge fund interest is still above average. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 18.6% in 2020 through July 27th but still beat the market by 17.1 percentage points. Hedge funds were also right about betting on WGO as the stock returned 131.6% since Q1 and outperformed the market. Hedge funds were rewarded for their relative bullishness.

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