Is WEX Inc (NYSE:WEX) a good place to invest some of your money right now? We can gain invaluable insight to help us answer that question by studying the investment trends of top investors, who employ world-class Ivy League graduates, who are given immense resources and industry contacts to put their financial expertise to work. The top picks of these firms have historically outperformed the market when we account for known risk factors, making them very valuable investment ideas.
WEX Inc (NYSE:WEX) investors should be aware of a decrease in hedge fund sentiment lately. Our calculations also showed that WEX isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings).
Video: Click the image to 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 Russell 2000 ETFs by 40 percentage points since May 2014 (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.
Paul Reeder of PAR Capital Management
Unlike the largest US hedge funds that are convinced Dow will soar past 40,000 or the world’s most bearish hedge fund that’s more convinced than ever that a crash is coming, our long-short investment strategy doesn’t rely on bull or bear markets to deliver double digit returns. We only rely on the best performing hedge funds‘ buy/sell signals. We’re going to go over the key hedge fund action surrounding WEX Inc (NYSE:WEX).
What have hedge funds been doing with WEX Inc (NYSE:WEX)?
At the end of the third quarter, a total of 25 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -19% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in WEX over the last 17 quarters. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, PAR Capital Management was the largest shareholder of WEX Inc (NYSE:WEX), with a stake worth $146.5 million reported as of the end of September. Trailing PAR Capital Management was Echo Street Capital Management, which amassed a stake valued at $94.6 million. Balyasny Asset Management, Columbus Circle Investors, and Carlson Capital 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 BlueMar Capital Management allocated the biggest weight to WEX Inc (NYSE:WEX), around 4.84% of its portfolio. Prana Capital Management is also relatively very bullish on the stock, earmarking 2.69 percent of its 13F equity portfolio to WEX.
Because WEX Inc (NYSE:WEX) has faced a decline in interest from the entirety of the hedge funds we track, it’s easy to see that there were a few hedge funds that elected to cut their entire stakes heading into Q4. Intriguingly, Louis Bacon’s Moore Global Investments cut the biggest stake of the “upper crust” of funds monitored by Insider Monkey, worth about $41.6 million in stock. James Parsons’s fund, Junto Capital Management, also said goodbye to its stock, about $41.1 million worth. These bearish behaviors are interesting, as total hedge fund interest was cut by 6 funds heading into Q4.
Let’s go over hedge fund activity in other stocks similar to WEX Inc (NYSE:WEX). We will take a look at Medical Properties Trust, Inc. (NYSE:MPW), Qorvo Inc (NASDAQ:QRVO), Carlyle Group LP (NASDAQ:CG), and Service Corporation International (NYSE:SCI). This group of stocks’ market values match WEX’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| MPW | 12 | 241800 | -1 |
| QRVO | 35 | 1240574 | 7 |
| CG | 7 | 201850 | 0 |
| SCI | 20 | 352282 | 5 |
| Average | 18.5 | 509127 | 2.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 18.5 hedge funds with bullish positions and the average amount invested in these stocks was $509 million. That figure was $474 million in WEX’s case. Qorvo Inc (NASDAQ:QRVO) is the most popular stock in this table. On the other hand Carlyle Group LP (NASDAQ:CG) is the least popular one with only 7 bullish hedge fund positions. WEX Inc (NYSE:WEX) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately WEX wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on WEX were disappointed as the stock returned -0.5% during the fourth quarter (through the end of November) 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 so far this year.
Disclosure: None. This article was originally published at Insider Monkey.
