Hedge Funds Have Never Been This Bullish On Westport Fuel Systems Inc. (WPRT)

Before we spend days researching a stock idea we like to take a look at how hedge funds and billionaire investors recently traded that stock. Russell 2000 ETF (IWM) lagged the larger S&P 500 ETF (SPY) by more than 10 percentage points since the end of the third quarter of 2018. This means hedge funds that are allocating a higher percentage of their portfolio to small-cap stocks were probably underperforming the market. However, this also means that as small-cap stocks start to mean revert, these hedge funds will start delivering better returns than the S&P 500 Index funds. In this article, we will take a look at what hedge funds think about Westport Fuel Systems Inc. (NASDAQ:WPRT).

Westport Fuel Systems Inc. (NASDAQ:WPRT) has experienced an increase in hedge fund sentiment recently. WPRT was in 13 hedge funds’ portfolios at the end of the second quarter of 2019. There were 12 hedge funds in our database with WPRT holdings at the end of the previous quarter. Our calculations also showed that WPRT 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.

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that hedge funds’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were 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’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 25.7% through September 30, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Clint Carlson, Carlson Capital

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 go over the fresh hedge fund action encompassing Westport Fuel Systems Inc. (NASDAQ:WPRT).

How are hedge funds trading Westport Fuel Systems Inc. (NASDAQ:WPRT)?

At Q2’s end, a total of 13 of the hedge funds tracked by Insider Monkey were long this stock, a change of 8% from the previous quarter. The graph below displays the number of hedge funds with bullish position in WPRT over the last 16 quarters. With hedgies’ positions undergoing their usual ebb and flow, there exists a few notable hedge fund managers who were boosting their holdings meaningfully (or already accumulated large positions).

No of Hedge Funds with WPRT Positions

The largest stake in Westport Fuel Systems Inc. (NASDAQ:WPRT) was held by Royce & Associates, which reported holding $17.5 million worth of stock at the end of March. It was followed by Manatuck Hill Partners with a $5.2 million position. Other investors bullish on the company included Renaissance Technologies, Carlson Capital, and D E Shaw.

As industrywide interest jumped, some big names have jumped into Westport Fuel Systems Inc. (NASDAQ:WPRT) headfirst. Ardsley Partners, managed by Philip Hempleman, initiated the most valuable position in Westport Fuel Systems Inc. (NASDAQ:WPRT). Ardsley Partners had $0.3 million invested in the company at the end of the quarter. Paul Tudor Jones’s Tudor Investment Corp also made a $0.2 million investment in the stock during the quarter. The only other fund with a new position in the stock is William Harnisch’s Peconic Partners LLC.

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Westport Fuel Systems Inc. (NASDAQ:WPRT) but similarly valued. These stocks are Computer Programs & Systems, Inc. (NASDAQ:CPSI), Regalwood Global Energy Ltd. (NYSE:RWGE), Vapotherm, Inc. (NYSE:VAPO), and Spartan Motors Inc (NASDAQ:SPAR). All of these stocks’ market caps are similar to WPRT’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
CPSI 12 28331 -6
RWGE 14 120281 0
VAPO 6 87293 1
SPAR 11 44244 -4
Average 10.75 70037 -2.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 10.75 hedge funds with bullish positions and the average amount invested in these stocks was $70 million. That figure was $36 million in WPRT’s case. Regalwood Global Energy Ltd. (NYSE:RWGE) is the most popular stock in this table. On the other hand Vapotherm, Inc. (NYSE:VAPO) is the least popular one with only 6 bullish hedge fund positions. Westport Fuel Systems Inc. (NASDAQ:WPRT) 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 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Unfortunately WPRT wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on WPRT were disappointed as the stock returned 0.4% 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 so far this year.

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