Hedge Funds Are Dumping WW International, Inc. (WW)

In this article you are going to find out whether hedge funds think WW International, Inc. (NASDAQ:WW) is a good investment right now. We like to check what the smart money thinks first before doing extensive research on a given stock. Although there have been several high profile failed hedge fund picks, the consensus picks among hedge fund investors have historically outperformed the market after adjusting for known risk attributes. It’s not surprising given that hedge funds have access to better information and more resources to predict the winners in the stock market.

WW International, Inc. (NASDAQ:WW) has seen a decrease in support from the world’s most elite money managers recently. WW was in 22 hedge funds’ portfolios at the end of the first quarter of 2020. There were 37 hedge funds in our database with WW positions at the end of the previous quarter. 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).

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 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 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.

John Petry Sessa Capital

John Petry of Sessa Capital

We leave no stone unturned when looking for the next great investment idea. For example, we believe electric vehicles and energy storage are set to become giant markets, and we want to take advantage of the declining lithium prices amid the COVID-19 pandemic. So we are checking out investment opportunities like these. 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. Keeping this in mind we’re going to review the key hedge fund action surrounding WW International, Inc. (NASDAQ:WW).

What have hedge funds been doing with 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 the fourth quarter of 2019. Below, you can check out the change in hedge fund sentiment towards WW over the last 18 quarters. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

The largest stake in WW International, Inc. (NASDAQ:WW) was held by Sessa Capital, which reported holding $49.8 million worth of stock at the end of September. It was followed by Stadium Capital Management with a $36.8 million position. Other investors bullish on the company included ThornTree Capital Partners, D E Shaw, and 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.

Due to the fact that WW International, Inc. (NASDAQ:WW) has witnessed falling interest from the aggregate hedge fund industry, it’s easy to see that there lies a certain “tier” of fund managers who were dropping their positions entirely by the end of the first quarter. It’s worth mentioning that Ricky Sandler’s Eminence Capital cut the largest stake of all the hedgies followed by Insider Monkey, totaling close to $114.9 million in stock, and David Cohen and Harold Levy’s Iridian Asset Management was right behind this move, as the fund dumped about $78.6 million worth. These transactions are important to note, as total hedge fund interest fell by 15 funds by the end of the first quarter.

Let’s go over hedge fund activity in other stocks similar to WW International, Inc. (NASDAQ:WW). We will take a look at 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 valuations are similar to WW’s market valuation.

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 13.9% in 2020 through June 10th but still managed to beat the market by 14.2 percentage points. Hedge funds were also right about betting on WW as the stock returned 49.6% so far in Q2 (through June 10th) 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.