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Hedge Funds Stay Consistent On Westwood Holdings Group, Inc. (WHG)

In this article we will check out the progression of hedge fund sentiment towards Westwood Holdings Group, Inc. (NYSE:WHG) and determine whether it is a good investment right now. We at Insider Monkey like to examine what billionaires and hedge funds think of a company before spending days of research on it. Given their 2 and 20 payment structure, hedge funds have more incentives and resources than the average investor. The funds have access to expert networks and get tips from industry insiders. They also employ numerous Ivy League graduates and MBAs. Like everyone else, hedge funds perform miserably at times, but their consensus picks have historically outperformed the market after risk adjustments.

Hedge fund interest in Westwood Holdings Group, Inc. (NYSE:WHG) shares was flat at the end of last quarter. This is usually a negative indicator. At the end of this article we will also compare WHG to other stocks including DermTech, Inc. (NASDAQ:DMTK), Eiger BioPharmaceuticals, Inc. (NASDAQ:EIGR), and Mallinckrodt Public Limited Company (NYSE:MNK) to get a better sense of its popularity.

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 was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 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’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 36% through May 18th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

RENAISSANCE TECHNOLOGIES

Jim Simons Founder of Renaissance Technologies

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, We take a look at lists like the 10 most profitable companies in the world to identify the compounders that are likely to deliver double digit returns. We interview hedge fund managers and ask them about their best ideas. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. For example we are checking out stocks recommended/scorned by legendary Bill Miller. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 in February after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind let’s take a look at the latest hedge fund action surrounding Westwood Holdings Group, Inc. (NYSE:WHG).

What have hedge funds been doing with Westwood Holdings Group, Inc. (NYSE:WHG)?

At the end of the first quarter, a total of 9 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 0% from the previous quarter. On the other hand, there were a total of 11 hedge funds with a bullish position in WHG a year ago. With hedgies’ capital changing hands, there exists an “upper tier” of notable hedge fund managers who were upping their holdings meaningfully (or already accumulated large positions).

When looking at the institutional investors followed by Insider Monkey, Renaissance Technologies has the number one position in Westwood Holdings Group, Inc. (NYSE:WHG), worth close to $12.3 million, corresponding to less than 0.1%% of its total 13F portfolio. Sitting at the No. 2 spot is Mario Gabelli of GAMCO Investors, with a $10.2 million position; the fund has 0.1% of its 13F portfolio invested in the stock. Other professional money managers that hold long positions consist of Cliff Asness’s AQR Capital Management, Chuck Royce’s Royce & Associates and D. E. Shaw’s D E Shaw. In terms of the portfolio weights assigned to each position GAMCO Investors allocated the biggest weight to Westwood Holdings Group, Inc. (NYSE:WHG), around 0.12% of its 13F portfolio. Renaissance Technologies is also relatively very bullish on the stock, earmarking 0.01 percent of its 13F equity portfolio to WHG.

Earlier we told you that the aggregate hedge fund interest in the stock was unchanged and we view this as a negative development. Even though there weren’t any hedge funds dumping their holdings during the first quarter, there weren’t any hedge funds initiating brand new positions. This indicates that hedge funds, at the very best, perceive this stock as dead money and they haven’t identified any viable catalysts that can attract investor attention.

Let’s now review hedge fund activity in other stocks similar to Westwood Holdings Group, Inc. (NYSE:WHG). These stocks are DermTech, Inc. (NASDAQ:DMTK), Eiger BioPharmaceuticals, Inc. (NASDAQ:EIGR), Mallinckrodt Public Limited Company (NYSE:MNK), and BRT Apartments Corp (NYSE:BRT). This group of stocks’ market values resemble WHG’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
DMTK 5 18775 2
EIGR 27 64702 2
MNK 18 17899 -2
BRT 6 9850 2
Average 14 27807 1

View table here if you experience formatting issues.

As you can see these stocks had an average of 14 hedge funds with bullish positions and the average amount invested in these stocks was $28 million. That figure was $26 million in WHG’s case. Eiger BioPharmaceuticals, Inc. (NASDAQ:EIGR) is the most popular stock in this table. On the other hand DermTech, Inc. (NASDAQ:DMTK) is the least popular one with only 5 bullish hedge fund positions. Westwood Holdings Group, Inc. (NYSE:WHG) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. 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 13.4% in 2020 through June 22nd and surpassed the market by 15.9 percentage points. Unfortunately WHG wasn’t nearly as popular as these 10 stocks (hedge fund sentiment was quite bearish); WHG investors were disappointed as the stock returned -8.8% during the second 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 10 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.

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