Hedge Funds Are Selling The Western Union Company (WU)

Hedge funds and large money managers usually invest with a focus on the long-term horizon and, therefore, short-lived dips or bumps on the charts usually don’t make them change their opinion towards a company. This time it may be different. The coronavirus pandemic destroyed the high correlations among major industries and asset classes. We are now in a stock pickers market where fundamentals of a stock have more effect on the price than the overall direction of the market. As a result we observe sudden and large changes in hedge fund positions depending on the news flow. Let’s take a look at the hedge fund sentiment towards The Western Union Company (NYSE:WU) to find out whether there were any major changes in hedge funds’ views.

Is The Western Union Company (NYSE:WU) a buy right now? The best stock pickers were in a bearish mood. The number of long hedge fund bets were cut by 1 lately. The Western Union Company (NYSE:WU) was in 28 hedge funds’ portfolios at the end of March. The all time high for this statistic is 36. Our calculations also showed that WU isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings). There were 29 hedge funds in our database with WU positions at the end of the fourth quarter.

If you’d ask most traders, hedge funds are viewed as underperforming, outdated investment tools of the past. While there are over 8000 funds trading at present, Our researchers hone in on the bigwigs of this club, approximately 850 funds. It is estimated that this group of investors direct bulk of all hedge funds’ total capital, and by watching their highest performing stock picks, Insider Monkey has deciphered a few investment strategies that have historically outrun the market. Insider Monkey’s flagship short hedge fund strategy exceeded the S&P 500 short ETFs by around 20 percentage points per annum since its inception in March 2017. Also, our monthly newsletter’s portfolio of long stock picks returned 206.8% since March 2017 (through May 2021) and beat the S&P 500 Index by more than 115 percentage points. You can download a sample issue of this newsletter on our website .

Paul Reeder PAR Capital Management

Paul Reeder of PAR Capital Management

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, economists warn of inflation flare up. So, we are checking out this backdoor gold play that has hit peak gains of 718% in a little over a year. 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. Keeping this in mind let’s go over the key hedge fund action regarding The Western Union Company (NYSE:WU).

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

At first quarter’s end, a total of 28 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -3% from the fourth quarter of 2020. By comparison, 34 hedge funds held shares or bullish call options in WU a year ago. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Is WU A Good Stock To Buy?

More specifically, D E Shaw was the largest shareholder of The Western Union Company (NYSE:WU), with a stake worth $105 million reported as of the end of March. Trailing D E Shaw was Two Sigma Advisors, which amassed a stake valued at $74 million. Renaissance Technologies, Millennium Management, and Junto Capital Management 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 0 allocated the biggest weight to The Western Union Company (NYSE:WU), around 1.1% of its 13F portfolio. 0 is also relatively very bullish on the stock, setting aside 0.25 percent of its 13F equity portfolio to WU.

Seeing as The Western Union Company (NYSE:WU) has experienced bearish sentiment from the aggregate hedge fund industry, logic holds that there were a few hedge funds that elected to cut their full holdings last quarter. Intriguingly, Charles de Vaulx’s International Value Advisers dropped the largest investment of all the hedgies tracked by Insider Monkey, worth an estimated $52.7 million in stock. Allon Hellmann’s fund, Full18 Capital, also said goodbye to its stock, about $1.5 million worth. These moves are intriguing to say the least, as aggregate hedge fund interest fell by 1 funds last quarter.

Let’s also examine hedge fund activity in other stocks similar to The Western Union Company (NYSE:WU). These stocks are Teck Resources Ltd (NYSE:TECK), Watsco Inc (NYSE:WSO), Cleveland-Cliffs Inc (NYSE:CLF), Dolby Laboratories, Inc. (NYSE:DLB), Aegon N.V. (NYSE:AEG), Comerica Incorporated (NYSE:CMA), and Floor & Decor Holdings, Inc. (NYSE:FND). This group of stocks’ market caps are similar to WU’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
TECK 30 1071508 -1
WSO 22 280163 -2
CLF 36 968204 9
DLB 34 783499 3
AEG 6 26294 2
CMA 32 704137 -6
FND 38 1100201 7
Average 28.3 704858 1.7

View table here if you experience formatting issues.

As you can see these stocks had an average of 28.3 hedge funds with bullish positions and the average amount invested in these stocks was $705 million. That figure was $410 million in WU’s case. Floor & Decor Holdings, Inc. (NYSE:FND) is the most popular stock in this table. On the other hand Aegon N.V. (NYSE:AEG) is the least popular one with only 6 bullish hedge fund positions. The Western Union Company (NYSE:WU) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for WU is 61.7. 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 July 9th and surpassed the market again by 6.7 percentage points. Unfortunately WU wasn’t nearly as popular as these 5 stocks (hedge fund sentiment was quite bearish); WU investors were disappointed as the stock returned -4.6% since the end of March (through 7/9) 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.

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