The latest 13F reporting period has come and gone, and Insider Monkey have plowed through 823 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 June 30th, when the S&P 500 Index was trading around the 3100 level. Since the end of March, investors decided to bet on the economic recovery and a stock market rebound. S&P 500 Index returned more than 50% since its bottom. In this article you are going to find out whether hedge funds thought Walker & Dunlop Inc. (NYSE:WD) was a good investment heading into the third quarter and how the stock traded in comparison to the top hedge fund picks.
Is Walker & Dunlop Inc. (NYSE:WD) the right pick for your portfolio? Hedge funds were taking a bearish view. The number of long hedge fund positions were cut by 1 lately. Walker & Dunlop Inc. (NYSE:WD) was in 18 hedge funds’ portfolios at the end of the second quarter of 2020. The all time high for this statistics is 25. Our calculations also showed that WD isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings and see the video for a quick look at the top 5 stocks). There were 19 hedge funds in our database with WD positions at the end of the first quarter.
Video: Watch our video about the top 5 most popular hedge fund stocks.
Today there are a large number of indicators stock traders put to use to appraise stocks. A duo of the less known indicators are hedge fund and insider trading activity. We have shown that, historically, those who follow the top picks of the top money managers can outclass their index-focused peers by a superb amount (see the details here).
Dmitry Balyasny of Balyasny Asset Management
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we are checking out this junior gold mining stock and we recommended this real estate stock to our monthly premium newsletter subscribers. 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. You can subscribe to our free daily newsletter on our website to get excerpts of these letters in your inbox. Now let’s check out the latest hedge fund action surrounding Walker & Dunlop Inc. (NYSE:WD).
What have hedge funds been doing with Walker & Dunlop Inc. (NYSE:WD)?
At the end of June, a total of 18 of the hedge funds tracked by Insider Monkey were long this stock, a change of -5% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards WD over the last 20 quarters. With the smart money’s positions undergoing their usual ebb and flow, there exists a few key hedge fund managers who were boosting their holdings significantly (or already accumulated large positions).
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, George Baxter’s Sabrepoint Capital has the largest position in Walker & Dunlop Inc. (NYSE:WD), worth close to $17 million, corresponding to 6.7% of its total 13F portfolio. Sitting at the No. 2 spot is Chuck Royce of Royce & Associates, with a $14.1 million position; the fund has 0.2% of its 13F portfolio invested in the stock. Other professional money managers with similar optimism comprise Blair Baker’s Precept Capital Management, Harry Gail’s Harspring Capital Management and Jeff Osher’s No Street Capital. In terms of the portfolio weights assigned to each position Sabrepoint Capital allocated the biggest weight to Walker & Dunlop Inc. (NYSE:WD), around 6.71% of its 13F portfolio. Harspring Capital Management is also relatively very bullish on the stock, dishing out 3.67 percent of its 13F equity portfolio to WD.
Seeing as Walker & Dunlop Inc. (NYSE:WD) has experienced declining sentiment from the entirety of the hedge funds we track, it’s safe to say that there is a sect of money managers that decided to sell off their full holdings in the second quarter. At the top of the heap, Mark Coe’s Intrinsic Edge Capital dumped the largest investment of all the hedgies followed by Insider Monkey, comprising an estimated $2 million in stock. Peter Rathjens, Bruce Clarke and John Campbell’s fund, Arrowstreet Capital, also said goodbye to its stock, about $1.2 million worth. These transactions are intriguing to say the least, as total hedge fund interest was cut by 1 funds in the second quarter.
Let’s go over hedge fund activity in other stocks similar to Walker & Dunlop Inc. (NYSE:WD). These stocks are Intercept Pharmaceuticals Inc (NASDAQ:ICPT), Spirit Airlines Incorporated (NYSE:SAVE), MakeMyTrip Limited (NASDAQ:MMYT), United Community Banks Inc (NASDAQ:UCBI), Ambarella Inc (NASDAQ:AMBA), EverQuote, Inc. (NASDAQ:EVER), and 360 DigiTech, Inc. (NASDAQ:QFIN). This group of stocks’ market caps are similar to WD’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| ICPT | 22 | 215147 | 3 |
| SAVE | 23 | 98598 | -5 |
| MMYT | 10 | 28493 | 1 |
| UCBI | 17 | 25165 | 6 |
| AMBA | 27 | 171060 | 6 |
| EVER | 23 | 271845 | 0 |
| QFIN | 12 | 64598 | 9 |
| Average | 19.1 | 124987 | 2.9 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 19.1 hedge funds with bullish positions and the average amount invested in these stocks was $125 million. That figure was $74 million in WD’s case. Ambarella Inc (NASDAQ:AMBA) is the most popular stock in this table. On the other hand MakeMyTrip Limited (NASDAQ:MMYT) is the least popular one with only 10 bullish hedge fund positions. Walker & Dunlop Inc. (NYSE:WD) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for WD is 49.1. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. 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 24.8% in 2020 through the end of September and surpassed the market by 19.3 percentage points. Unfortunately WD wasn’t nearly as popular as these 10 stocks (hedge fund sentiment was quite bearish); WD investors were disappointed as the stock returned 5% in the third quarter and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.
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Disclosure: None. This article was originally published at Insider Monkey.
