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Hedge Funds Are Abandoning Wipro Limited (WIT)

The financial regulations require hedge funds and wealthy investors that exceeded the $100 million equity holdings threshold to file a report that shows their positions at the end of every quarter. Even though it isn’t the intention, these filings to a certain extent level the playing field for ordinary investors. The latest round of 13F filings disclosed the funds’ positions on March 31st, about a week after the S&P 500 Index bottomed. We at Insider Monkey have made an extensive database of more than 821 of those established hedge funds and famous value investors’ filings. In this article, we analyze how these elite funds and prominent investors traded Wipro Limited (NYSE:WIT) based on those filings.

Is Wipro Limited (NYSE:WIT) ready to rally soon? Investors who are in the know are turning less bullish. The number of long hedge fund positions dropped by 5 lately. Our calculations also showed that WIT 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.

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 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.

FISHER ASSET MANAGEMENT

Ken Fisher of Fisher Asset Management

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, 2020’s unprecedented market conditions provide us with the highest number of trading opportunities in a decade. So we are checking out stocks recommended/scorned by legendary Bill Miller. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Now let’s check out the recent hedge fund action surrounding Wipro Limited (NYSE:WIT).

What does smart money think about Wipro Limited (NYSE:WIT)?

Heading into the second quarter of 2020, a total of 7 of the hedge funds tracked by Insider Monkey were long this stock, a change of -42% from one quarter earlier. By comparison, 11 hedge funds held shares or bullish call options in WIT a year ago. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

The largest stake in Wipro Limited (NYSE:WIT) was held by AQR Capital Management, which reported holding $28 million worth of stock at the end of September. It was followed by Fisher Asset Management with a $13.7 million position. Other investors bullish on the company included Renaissance Technologies, D E Shaw, and Sensato Capital Management. In terms of the portfolio weights assigned to each position Sensato Capital Management allocated the biggest weight to Wipro Limited (NYSE:WIT), around 1.69% of its 13F portfolio. AQR Capital Management is also relatively very bullish on the stock, designating 0.05 percent of its 13F equity portfolio to WIT.

Judging by the fact that Wipro Limited (NYSE:WIT) has faced declining sentiment from hedge fund managers, it’s easy to see that there is a sect of fund managers that decided to sell off their entire stakes last quarter. It’s worth mentioning that Ben Levine, Andrew Manuel and Stefan Renold’s LMR Partners cut the largest position of all the hedgies tracked by Insider Monkey, comprising an estimated $19.7 million in stock, and Simon Sadler’s Segantii Capital was right behind this move, as the fund sold off about $13.5 million worth. These bearish behaviors are intriguing to say the least, as aggregate hedge fund interest was cut by 5 funds last quarter.

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Wipro Limited (NYSE:WIT) but similarly valued. These stocks are Corteva, Inc. (NYSE:CTVA), Rockwell Automation Inc. (NYSE:ROK), Fortinet Inc (NASDAQ:FTNT), and Nokia Corporation (NYSE:NOK). All of these stocks’ market caps match WIT’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
CTVA 36 509655 9
ROK 37 335488 -2
FTNT 29 1465283 -13
NOK 23 178356 7
Average 31.25 622196 0.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 31.25 hedge funds with bullish positions and the average amount invested in these stocks was $622 million. That figure was $57 million in WIT’s case. Rockwell Automation Inc. (NYSE:ROK) is the most popular stock in this table. On the other hand Nokia Corporation (NYSE:NOK) is the least popular one with only 23 bullish hedge fund positions. Compared to these stocks Wipro Limited (NYSE:WIT) is even less popular than NOK. Hedge funds dodged a bullet by taking a bearish stance towards WIT. Our calculations showed that the top 10 most popular hedge fund stocks returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 13.9% in 2020 through June 10th but managed to beat the market by 14.2 percentage points. Unfortunately WIT wasn’t nearly as popular as these 10 stocks (hedge fund sentiment was very bearish); WIT investors were disappointed as the stock returned 5.8% during the second quarter (through June 10th) 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 so far in 2020.

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