At the end of February we announced the arrival of the first US recession since 2009 and we predicted that the market will decline by at least 20% in (Recession is Imminent: We Need A Travel Ban NOW). In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. In this article, we will take a closer look at hedge fund sentiment towards World Wrestling Entertainment, Inc. (NYSE:WWE).
World Wrestling Entertainment, Inc. (NYSE:WWE) investors should pay attention to an increase in support from the world’s most elite money managers lately. Our calculations also showed that WWE 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 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 S&P 500 ETFs by 51 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 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.
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 trades like this one. 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. With all of this in mind we’re going to go over the new hedge fund action surrounding World Wrestling Entertainment, Inc. (NYSE:WWE).
How have hedgies been trading World Wrestling Entertainment, Inc. (NYSE:WWE)?
Heading into the second quarter of 2020, a total of 31 of the hedge funds tracked by Insider Monkey were long this stock, a change of 3% from the previous quarter. The graph below displays the number of hedge funds with bullish position in WWE over the last 18 quarters. With hedge funds’ capital changing hands, there exists a few key hedge fund managers who were increasing their stakes substantially (or already accumulated large positions).
More specifically, Cadian Capital was the largest shareholder of World Wrestling Entertainment, Inc. (NYSE:WWE), with a stake worth $109.9 million reported as of the end of September. Trailing Cadian Capital was SRS Investment Management, which amassed a stake valued at $60.5 million. Eminence Capital, Sirios Capital Management, and Marathon Partners 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 Marathon Partners allocated the biggest weight to World Wrestling Entertainment, Inc. (NYSE:WWE), around 15.1% of its 13F portfolio. Cowbird Capital is also relatively very bullish on the stock, earmarking 12.42 percent of its 13F equity portfolio to WWE.
As one would reasonably expect, key money managers have been driving this bullishness. Cadian Capital, managed by Eric Bannasch, assembled the largest position in World Wrestling Entertainment, Inc. (NYSE:WWE). Cadian Capital had $109.9 million invested in the company at the end of the quarter. Ricky Sandler’s Eminence Capital also made a $56.8 million investment in the stock during the quarter. The following funds were also among the new WWE investors: Dmitry Balyasny’s Balyasny Asset Management, Malcolm Levine’s Dendur Capital, and Michael Zimmerman’s Prentice Capital Management.
Let’s check out hedge fund activity in other stocks similar to World Wrestling Entertainment, Inc. (NYSE:WWE). We will take a look at Yamana Gold Inc. (NYSE:AUY), Power Integrations Inc (NASDAQ:POWI), The Gap Inc. (NYSE:GPS), and Kirby Corporation (NYSE:KEX). All of these stocks’ market caps are closest to WWE’s market cap.
|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 20 hedge funds with bullish positions and the average amount invested in these stocks was $156 million. That figure was $375 million in WWE’s case. The Gap Inc. (NYSE:GPS) is the most popular stock in this table. On the other hand Yamana Gold Inc. (NYSE:AUY) is the least popular one with only 14 bullish hedge fund positions. Compared to these stocks World Wrestling Entertainment, Inc. (NYSE:WWE) 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 8.3% in 2020 through the end of May but still managed to beat the market by 13.2 percentage points. Hedge funds were also right about betting on WWE as the stock returned 36.4% so far in Q2 (through the end of May) 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.
Disclosure: None. This article was originally published at Insider Monkey.