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Hedge Funds Are Nibbling On The Wendy’s Company (WEN)

The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We at Insider Monkey have plowed through 821 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 March 31st, a week after the market trough. In this article we look at what those investors think of The Wendy’s Company (NASDAQ:WEN).

The Wendy’s Company (NASDAQ:WEN) shareholders have witnessed an increase in support from the world’s most elite money managers in recent months. Our calculations also showed that WEN 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.

In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s monthly stock picks returned 87% since March 2017 and outperformed the S&P 500 ETFs by more than 51 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

TRIAN PARTNERS

Nelson Peltz of Trian Partners

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. Now let’s view the new hedge fund action regarding The Wendy’s Company (NASDAQ:WEN).

Hedge fund activity in The Wendy’s Company (NASDAQ:WEN)

At Q1’s end, a total of 35 of the hedge funds tracked by Insider Monkey were long this stock, a change of 25% from the previous quarter. The graph below displays the number of hedge funds with bullish position in WEN over the last 18 quarters. With hedgies’ positions undergoing their usual ebb and flow, there exists a few notable hedge fund managers who were upping their holdings significantly (or already accumulated large positions).

Is WEN A Good Stock To Buy?

Among these funds, Trian Partners held the most valuable stake in The Wendy’s Company (NASDAQ:WEN), which was worth $396.3 million at the end of the third quarter. On the second spot was Melvin Capital Management which amassed $81.8 million worth of shares. Citadel Investment Group, Horizon Asset Management, and Two Sigma Advisors 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 Clearfield Capital allocated the biggest weight to The Wendy’s Company (NASDAQ:WEN), around 7.3% of its 13F portfolio. Trian Partners is also relatively very bullish on the stock, setting aside 5.71 percent of its 13F equity portfolio to WEN.

As aggregate interest increased, key money managers were breaking ground themselves. Melvin Capital Management, managed by Gabriel Plotkin, established the biggest position in The Wendy’s Company (NASDAQ:WEN). Melvin Capital Management had $81.8 million invested in the company at the end of the quarter. Lee Ainslie’s Maverick Capital also made a $11.8 million investment in the stock during the quarter. The following funds were also among the new WEN investors: Kamyar Khajavi’s MIK Capital, Philip Hilal’s Clearfield Capital, and Cristan Blackman’s Empirical Capital Partners.

Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as The Wendy’s Company (NASDAQ:WEN) but similarly valued. These stocks are DXC Technology Company (NYSE:DXC), Vedanta Ltd (NYSE:VEDL), Aerojet Rocketdyne Holdings Inc (NYSE:AJRD), and ADT Inc. (NYSE:ADT). This group of stocks’ market caps are closest to WEN’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
DXC 41 382695 -6
VEDL 11 26697 -2
AJRD 23 422895 2
ADT 20 98631 -1
Average 23.75 232730 -1.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 23.75 hedge funds with bullish positions and the average amount invested in these stocks was $233 million. That figure was $706 million in WEN’s case. DXC Technology Company (NYSE:DXC) is the most popular stock in this table. On the other hand Vedanta Ltd (NYSE:VEDL) is the least popular one with only 11 bullish hedge fund positions. The Wendy’s Company (NASDAQ:WEN) is not the most popular stock in this group but hedge fund interest is still above average. 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 8.3% in 2020 through the end of May but still beat the market by 13.2 percentage points. Hedge funds were also right about betting on WEN as the stock returned 43.2% in Q2 (through the end of May) and outperformed the market. Hedge funds were rewarded for their relative bullishness.

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