Before putting in our own effort and resources into finding a good investment, we can quickly utilize hedge fund expertise to give us a quick glimpse of whether that stock could make for a good addition to our portfolios. The odds are not exactly stacked in investors’ favor when it comes to beating the market, as evidenced by the fact that less than 49% of the stocks in the S&P 500 did so during the third quarter. The stats were even worse in recent years when most of the advances in the market were due to large gains by FAANG stocks. However, one bright side for individual investors was the strong performance of hedge funds’ top consensus picks. This year hedge funds’ top 20 stock picks outperformed the S&P 500 Index by 4 percentage points through September 30th. Thus, we can see that the tireless research and efforts of hedge funds to identify winning stocks can work to our advantage when we know how to use the data. While not all of their picks will be winners, our odds are much better following their best stock picks than trying to go it alone.
World Wrestling Entertainment, Inc. (NYSE:WWE) has seen a decrease in hedge fund interest recently. WWE was in 39 hedge funds’ portfolios at the end of the second quarter of 2019. There were 47 hedge funds in our database with WWE positions at the end of the previous quarter. Our calculations also showed that WWE isn’t among the 30 most popular stocks among hedge funds (view the video below).
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? 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 market by 40 percentage points since May 2014 through May 30, 2019 (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. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in our short portfolio.
Unlike former hedge manager, Dr. Steve Sjuggerud, who is convinced Dow will soar past 40000, our long-short investment strategy doesn’t rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. We’re going to take a look at the recent hedge fund action regarding World Wrestling Entertainment, Inc. (NYSE:WWE).
How have hedgies been trading World Wrestling Entertainment, Inc. (NYSE:WWE)?
Heading into the third quarter of 2019, a total of 39 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -17% from the first quarter of 2019. The graph below displays the number of hedge funds with bullish position in WWE over the last 16 quarters. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
According to Insider Monkey’s hedge fund database, Stephen Mandel’s Lone Pine Capital has the number one position in World Wrestling Entertainment, Inc. (NYSE:WWE), worth close to $194.4 million, accounting for 1.2% of its total 13F portfolio. Coming in second is Renaissance Technologies holding a $177.7 million position; 0.2% of its 13F portfolio is allocated to the stock. Some other hedge funds and institutional investors that are bullish consist of Ken Griffin’s Citadel Investment Group, Robert Boucai’s Newbrook Capital Advisors and Glen Kacher’s Light Street Capital.
Judging by the fact that World Wrestling Entertainment, Inc. (NYSE:WWE) has experienced bearish sentiment from the entirety of the hedge funds we track, we can see that there exists a select few fund managers that slashed their full holdings last quarter. Interestingly, Robert Pohly’s Samlyn Capital cut the largest investment of all the hedgies watched by Insider Monkey, worth close to $58.6 million in stock, and George Soros’s Soros Fund Management was right behind this move, as the fund said goodbye to about $28.2 million worth. These bearish behaviors are important to note, as total hedge fund interest fell by 8 funds last quarter.
Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as World Wrestling Entertainment, Inc. (NYSE:WWE) but similarly valued. We will take a look at Parsley Energy Inc (NYSE:PE), Oshkosh Corporation (NYSE:OSK), James Hardie Industries plc (NYSE:JHX), and Manpowergroup Inc (NYSE:MAN). This group of stocks’ market values match WWE’s market value.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
View table here if you experience formatting issues.
As you can see these stocks had an average of 19.75 hedge funds with bullish positions and the average amount invested in these stocks was $409 million. That figure was $978 million in WWE’s case. Parsley Energy Inc (NYSE:PE) is the most popular stock in this table. On the other hand James Hardie Industries plc (NYSE:JHX) is the least popular one with only 2 bullish hedge fund positions. Compared to these stocks World Wrestling Entertainment, Inc. (NYSE:WWE) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Unfortunately WWE wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on WWE were disappointed as the stock returned -1.3% during the third quarter and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as many of these stocks already outperformed the market in Q3.
Disclosure: None. This article was originally published at Insider Monkey.