Did Hedge Funds Make The Right Call On WW International, Inc. (WW) ?

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 thoughtWW International, Inc. (NASDAQ:WW) was a good investment heading into the second quarter and how the stock traded in comparison to the top hedge fund picks.

Is WW International, Inc. (NASDAQ:WW) a cheap stock to buy now? The best stock pickers were becoming less hopeful. The number of bullish hedge fund bets went down by 15 in recent months. Our calculations also showed that WW 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). WW was in 22 hedge funds’ portfolios at the end of March. There were 37 hedge funds in our database with WW positions at the end of the previous quarter.

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

In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s monthly stock picks returned 101% since March 2017 and outperformed the S&P 500 ETFs by more than 58 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

John Petry Sessa Capital

John Petry of Sessa Capital

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, on one site we found out that NBA champion Isiah Thomas is now the CEO of this cannabis company. The same site also talks about a snack manufacturer that’s growing at 30% annually. 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. Hedge fund sentiment towards Tesla reached its all time high at the end of 2019 and Tesla shares more than tripled this year. We are trying to identify other EV revolution winners, so if you have any good ideas send us an email. Now let’s take a peek at the fresh hedge fund action encompassing WW International, Inc. (NASDAQ:WW).

How are hedge funds trading WW International, Inc. (NASDAQ:WW)?

At the end of the first quarter, a total of 22 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -41% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in WW over the last 18 quarters. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

When looking at the institutional investors followed by Insider Monkey, Sessa Capital, managed by John Petry, holds the most valuable position in WW International, Inc. (NASDAQ:WW). Sessa Capital has a $49.8 million position in the stock, comprising 6.1% of its 13F portfolio. The second most bullish fund manager is Alexander Medina Seaver of Stadium Capital Management, with a $36.8 million position; the fund has 20.9% of its 13F portfolio invested in the stock. Some other hedge funds and institutional investors that hold long positions encompass Mark Moore’s ThornTree Capital Partners, D. E. Shaw’s D E Shaw 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 20.86% of its 13F portfolio. ThornTree Capital Partners is also relatively very bullish on the stock, designating 10.06 percent of its 13F equity portfolio to WW.

Seeing as WW International, Inc. (NASDAQ:WW) has witnessed declining sentiment from hedge fund managers, we can see that there was a specific group of money managers that elected to cut their full holdings last quarter. At the top of the heap, Ricky Sandler’s Eminence Capital sold off the largest investment of the 750 funds monitored by Insider Monkey, worth close to $114.9 million in stock. David Cohen and Harold Levy’s fund, Iridian Asset Management, also cut its stock, about $78.6 million worth. These transactions are interesting, as total hedge fund interest fell by 15 funds last quarter.

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as WW International, Inc. (NASDAQ:WW) but similarly valued. These stocks are Beacon Roofing Supply, Inc. (NASDAQ:BECN), LGI Homes Inc (NASDAQ:LGIH), Allscripts Healthcare Solutions Inc (NASDAQ:MDRX), and Shutterstock Inc (NYSE:SSTK). This group of stocks’ market values match WW’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
BECN 20 164410 -2
LGIH 14 53155 1
MDRX 17 126905 -14
SSTK 13 77238 -2
Average 16 105427 -4.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 16 hedge funds with bullish positions and the average amount invested in these stocks was $105 million. That figure was $176 million in WW’s case. Beacon Roofing Supply, Inc. (NASDAQ:BECN) is the most popular stock in this table. On the other hand Shutterstock Inc (NYSE:SSTK) is the least popular one with only 13 bullish hedge fund positions. Compared to these stocks WW International, Inc. (NASDAQ:WW) is more popular among hedge funds. 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 returned 12.3% in 2020 through June 30th but still managed to beat the market by 15.5 percentage points. Hedge funds were also right about betting on WW as the stock returned 50.1% in Q2 and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.

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