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Hedge Funds Have Never Been More Bullish On WD-40 Company (WDFC)

We at Insider Monkey have gone over 730 13F filings that hedge funds and prominent investors are required to file by the SEC The 13F filings show the funds’ and investors’ portfolio positions as of June 28th. In this article, we look at what those funds think of WD-40 Company (NASDAQ:WDFC) based on that data.

WD-40 Company (NASDAQ:WDFC) has seen an increase in activity from the world’s largest hedge funds of late. WDFC was in 15 hedge funds’ portfolios at the end of the second quarter of 2019. There were 14 hedge funds in our database with WDFC positions at the end of the previous quarter. Our calculations also showed that WDFC isn’t among the 30 most popular stocks among hedge funds (see the video below).
5 Most Popular Stocks Among Hedge Funds
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.

WDFC_oct2019

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 key hedge fund action encompassing WD-40 Company (NASDAQ:WDFC).

What does smart money think about WD-40 Company (NASDAQ:WDFC)?

Heading into the third quarter of 2019, a total of 15 of the hedge funds tracked by Insider Monkey were long this stock, a change of 7% from the first quarter of 2019. The graph below displays the number of hedge funds with bullish position in WDFC 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.

Bruce Kovner, Caxton Associates LP

The largest stake in WD-40 Company (NASDAQ:WDFC) was held by Renaissance Technologies, which reported holding $61.1 million worth of stock at the end of March. It was followed by GLG Partners with a $30.3 million position. Other investors bullish on the company included Citadel Investment Group, GAMCO Investors, and AQR Capital Management.

Now, specific money managers were leading the bulls’ herd. Laurion Capital Management, managed by Benjamin A. Smith, initiated the most outsized position in WD-40 Company (NASDAQ:WDFC). Laurion Capital Management had $1.3 million invested in the company at the end of the quarter. Dmitry Balyasny’s Balyasny Asset Management also initiated a $1 million position during the quarter. The only other fund with a brand new WDFC position is Bruce Kovner’s Caxton Associates LP.

Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as WD-40 Company (NASDAQ:WDFC) but similarly valued. We will take a look at Belden Inc. (NYSE:BDC), Granite Construction Incorporated (NYSE:GVA), Matador Resources Co (NYSE:MTDR), and ESCO Technologies Inc. (NYSE:ESE). This group of stocks’ market valuations resemble WDFC’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
BDC 15 81149 -1
GVA 11 65578 -4
MTDR 12 240162 -2
ESE 4 2864 -3
Average 10.5 97438 -2.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 10.5 hedge funds with bullish positions and the average amount invested in these stocks was $97 million. That figure was $128 million in WDFC’s case. Belden Inc. (NYSE:BDC) is the most popular stock in this table. On the other hand ESCO Technologies Inc. (NYSE:ESE) is the least popular one with only 4 bullish hedge fund positions. WD-40 Company (NASDAQ:WDFC) is not the most popular stock in this group but hedge fund interest is still above average. 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. Hedge funds were also right about betting on WDFC as the stock returned 15.8% during the third quarter and outperformed the market. Hedge funds were rewarded for their relative bullishness.

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

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