Hedge Funds Never Been Less Bullish On Waitr Holdings Inc. (WTRH)

The financial regulations require hedge funds and wealthy investors that exceeded the $100 million equity holdings threshold to file a report that shows their positions at the end of every quarter. Even though it isn’t the intention, these filings to a certain extent level the playing field for ordinary investors. The latest round of 13F filings disclosed the funds’ positions on March 31st, about a week after the S&P 500 Index bottomed. We at Insider Monkey have made an extensive database of more than 821 of those established hedge funds and famous value investors’ filings. In this article, we analyze how these elite funds and prominent investors traded Waitr Holdings Inc. (NASDAQ:WTRH) based on those filings.

Is Waitr Holdings Inc. (NASDAQ:WTRH) a sound investment right now? Money managers are selling. The number of long hedge fund positions were trimmed by 1 in recent months. Our calculations also showed that WTRH isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks). WTRH was in 7 hedge funds’ portfolios at the end of March. There were 8 hedge funds in our database with WTRH positions at the end of the previous quarter.

Video: 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 S&P 500 ETFs by 58 percentage points since March 2017 (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.

Christian Leone of Luxor Capital Group

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, 2020’s unprecedented market conditions provide us with the highest number of trading opportunities in a decade. So we are checking out stocks recommended/scorned by legendary Bill Miller. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Now we’re going to review the recent hedge fund action surrounding Waitr Holdings Inc. (NASDAQ:WTRH).

How are hedge funds trading Waitr Holdings Inc. (NASDAQ:WTRH)?

At Q1’s end, a total of 7 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -13% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in WTRH over the last 18 quarters. With the smart money’s sentiment swirling, there exists a few notable hedge fund managers who were increasing their holdings significantly (or already accumulated large positions).

Is WRTH A Good Stock To Buy?

Among these funds, Leucadia National held the most valuable stake in Waitr Holdings Inc. (NASDAQ:WTRH), which was worth $4.8 million at the end of the third quarter. On the second spot was Luxor Capital Group which amassed $1 million worth of shares. Hound Partners, Millennium Management, and Citadel Investment Group 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 Leucadia National allocated the biggest weight to Waitr Holdings Inc. (NASDAQ:WTRH), around 6.38% of its 13F portfolio. Hound Partners is also relatively very bullish on the stock, setting aside 0.09 percent of its 13F equity portfolio to WTRH.

Due to the fact that Waitr Holdings Inc. (NASDAQ:WTRH) has faced a decline in interest from the smart money, it’s easy to see that there were a few money managers that slashed their positions entirely in the first quarter. It’s worth mentioning that Ross Turner’s Pelham Capital sold off the largest position of the “upper crust” of funds followed by Insider Monkey, valued at about $1.4 million in stock, and Renaissance Technologies was right behind this move, as the fund dropped about $0 million worth. These bearish behaviors are interesting, as total hedge fund interest was cut by 1 funds in the first quarter.

Let’s now review hedge fund activity in other stocks similar to Waitr Holdings Inc. (NASDAQ:WTRH). These stocks are Turtle Beach Corp (NASDAQ:HEAR), Culp, Inc. (NYSE:CULP), Blue Ridge Bankshares, Inc. (NYSE:BRBS), and LiqTech International Inc (NYSE:LIQT). This group of stocks’ market values are similar to WTRH’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
HEAR 10 4194 -1
CULP 9 8619 1
BRBS 1 988 0
LIQT 3 4588 -3
Average 5.75 4597 -0.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 5.75 hedge funds with bullish positions and the average amount invested in these stocks was $5 million. That figure was $7 million in WTRH’s case. Turtle Beach Corp (NASDAQ:HEAR) is the most popular stock in this table. On the other hand Blue Ridge Bankshares, Inc. (NYSE:BRBS) is the least popular one with only 1 bullish hedge fund positions. Waitr Holdings Inc. (NASDAQ:WTRH) is not the most popular stock in this group but hedge fund interest is still above average. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 13.9% in 2020 through June 10th but still beat the market by 14.2 percentage points. Hedge funds were also right about betting on WTRH as the stock returned 66.7% in Q2 (through June 10th) and outperformed the market. Hedge funds were rewarded for their relative bullishness.

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