Hedge Funds Are Nibbling On WhiteHorse Finance, Inc. (WHF)

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. Insider Monkey finished processing 866 13F filings submitted by hedge funds and prominent investors. These filings show these funds’ portfolio positions as of March 31st, 2020. What do these smart investors think about WhiteHorse Finance, Inc. (NASDAQ:WHF)?

WhiteHorse Finance, Inc. (NASDAQ:WHF) was in 3 hedge funds’ portfolios at the end of March. The all time high for this statistic is 8. WHF has experienced an increase in hedge fund interest in recent months. There were 2 hedge funds in our database with WHF holdings at the end of December. Our calculations also showed that WHF isn’t among the 30 most popular stocks among hedge funds (click for Q1 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. 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 115 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 scour multiple sources to uncover the next great investment idea. For example, an activist hedge fund wants to buy this $28 biotech stock for $50. So, we recommended a long position to our monthly premium newsletter subscribers. We go through lists like the 10 best battery stocks 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. Now we’re going to analyze the fresh hedge fund action encompassing WhiteHorse Finance, Inc. (NASDAQ:WHF).

Do Hedge Funds Think WHF Is A Good Stock To Buy Now?

At first quarter’s end, a total of 3 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 50% from the fourth quarter of 2020. By comparison, 5 hedge funds held shares or bullish call options in WHF a year ago. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

More specifically, Two Sigma Advisors was the largest shareholder of WhiteHorse Finance, Inc. (NASDAQ:WHF), with a stake worth $1.5 million reported as of the end of March. Trailing Two Sigma Advisors was Citadel Investment Group, which amassed a stake valued at $0.5 million. ExodusPoint Capital was 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 Two Sigma Advisors allocated the biggest weight to WhiteHorse Finance, Inc. (NASDAQ:WHF), around 0.0041% of its 13F portfolio. ExodusPoint Capital is also relatively very bullish on the stock, designating 0.0025 percent of its 13F equity portfolio to WHF.

Now, key money managers were breaking ground themselves. Citadel Investment Group, managed by Ken Griffin, initiated the most outsized position in WhiteHorse Finance, Inc. (NASDAQ:WHF). Citadel Investment Group had $0.5 million invested in the company at the end of the quarter. Michael Gelband’s ExodusPoint Capital also initiated a $0.2 million position during the quarter.

Let’s go over hedge fund activity in other stocks similar to WhiteHorse Finance, Inc. (NASDAQ:WHF). These stocks are United Insurance Holdings Corp. (NASDAQ:UIHC), Silicom Ltd. (NASDAQ:SILC), Landec Corporation (NASDAQ:LNDC), Heritage Insurance Holdings Inc (NYSE:HRTG), Howard Bancorp Inc (NASDAQ:HBMD), CTO Realty Growth Inc (NYSE:CTO), and Limoneira Company (NASDAQ:LMNR). This group of stocks’ market valuations are similar to WHF’s market valuation.

View table here if you experience formatting issues.

As you can see these stocks had an average of 8.7 hedge funds with bullish positions and the average amount invested in these stocks was $27 million. That figure was $2 million in WHF’s case. Landec Corporation (NASDAQ:LNDC) is the most popular stock in this table. On the other hand Limoneira Company (NASDAQ:LMNR) is the least popular one with only 2 bullish hedge fund positions. WhiteHorse Finance, Inc. (NASDAQ:WHF) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for WHF is 21.8. 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 17.2% in 2021 through June 11th and surpassed the market again by 3.3 percentage points. Unfortunately WHF wasn’t nearly as popular as these 5 stocks (hedge fund sentiment was quite bearish); WHF investors were disappointed as the stock returned 4.4% since the end of March (through 6/11) 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.

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