At Insider Monkey, we pore over the filings of nearly 873 top investment firms every quarter, a process we have now completed for the latest reporting period. The data we’ve gathered as a result gives us access to a wealth of collective knowledge based on these firms’ portfolio holdings as of June 30th. In this article, we will use that wealth of knowledge to determine whether or not WEX Inc (NYSE:WEX) makes for a good investment right now.
WEX Inc (NYSE:WEX) has seen a decrease in enthusiasm from smart money in recent months. WEX Inc (NYSE:WEX) was in 20 hedge funds’ portfolios at the end of June. The all time high for this statistic is 35. There were 26 hedge funds in our database with WEX positions at the end of the first quarter. Our calculations also showed that WEX isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings).
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. Hedge funds have more than $3.5 trillion in assets under management, so you can’t expect their entire portfolios to beat the market by large margins. 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 79 percentage points since March 2017 (see the details here). So you can still find a lot of gems by following hedge funds’ moves today.
Dmitry Balyasny of Balyasny Asset Management
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, plant based food market is expected to explode 100-fold by 2050, so we are checking out this under-the-radar stock. We go through lists like the 10 best growth stocks to buy to pick the next Tesla that will deliver a 10x return. 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 homepage. With all of this in mind let’s go over the fresh hedge fund action surrounding WEX Inc (NYSE:WEX).
Do Hedge Funds Think WEX Is A Good Stock To Buy Now?
At Q2’s end, a total of 20 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -23% from the first quarter of 2020. By comparison, 24 hedge funds held shares or bullish call options in WEX a year ago. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Paul Reeder and Edward Shapiro’s PAR Capital Management has the biggest position in WEX Inc (NYSE:WEX), worth close to $223 million, corresponding to 5.5% of its total 13F portfolio. The second largest stake is held by Impactive Capital, led by Lauren Taylor Wolfe, holding a $107.5 million position; 8.9% of its 13F portfolio is allocated to the company. Some other members of the smart money that are bullish encompass Israel Englander’s Millennium Management, Jeff Lignelli’s Incline Global Management and Dmitry Balyasny’s Balyasny Asset Management. In terms of the portfolio weights assigned to each position Impactive Capital allocated the biggest weight to WEX Inc (NYSE:WEX), around 8.92% of its 13F portfolio. PAR Capital Management is also relatively very bullish on the stock, setting aside 5.46 percent of its 13F equity portfolio to WEX.
Because WEX Inc (NYSE:WEX) has witnessed bearish sentiment from the aggregate hedge fund industry, it’s easy to see that there was a specific group of fund managers who were dropping their full holdings in the second quarter. It’s worth mentioning that Brett Barakett’s Tremblant Capital cut the biggest investment of the “upper crust” of funds tracked by Insider Monkey, worth an estimated $64.3 million in stock, and James Parsons’s Junto Capital Management was right behind this move, as the fund dropped about $56.4 million worth. These moves are important to note, as aggregate hedge fund interest was cut by 6 funds in the second quarter.
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as WEX Inc (NYSE:WEX) but similarly valued. These stocks are Zions Bancorporation, National Association (NASDAQ:ZION), Ralph Lauren Corporation (NYSE:RL), Capri Holdings Limited (NYSE:CPRI), Jabil Inc. (NYSE:JBL), Ares Capital Corporation (NASDAQ:ARCC), Arrowhead Pharmaceuticals Inc. (NASDAQ:ARWR), and Skillz Inc. (NYSE:SKLZ). This group of stocks’ market values match WEX’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| ZION | 24 | 153157 | 0 |
| RL | 32 | 690613 | -2 |
| CPRI | 44 | 891139 | -3 |
| JBL | 26 | 513612 | 2 |
| ARCC | 12 | 86611 | -3 |
| ARWR | 30 | 211148 | 10 |
| SKLZ | 20 | 1137649 | -6 |
| Average | 26.9 | 526276 | -0.3 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 26.9 hedge funds with bullish positions and the average amount invested in these stocks was $526 million. That figure was $474 million in WEX’s case. Capri Holdings Limited (NYSE:CPRI) is the most popular stock in this table. On the other hand Ares Capital Corporation (NASDAQ:ARCC) is the least popular one with only 12 bullish hedge fund positions. WEX Inc (NYSE:WEX) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for WEX is 28.6. 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 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 24% in 2021 through October 22nd and surpassed the market again by 1.6 percentage points. Unfortunately WEX wasn’t nearly as popular as these 5 stocks (hedge fund sentiment was quite bearish); WEX investors were disappointed as the stock returned 0.4% since the end of June (through 10/22) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2021.
Follow Wex Inc. (NYSE:WEX)
Follow Wex Inc. (NYSE:WEX)
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Disclosure: None. This article was originally published at Insider Monkey.
