Here is What Hedge Funds Think About Walker & Dunlop Inc. (WD)

Last year we predicted the arrival of the first US recession since 2009 and we told in advance that the market will decline by at least 20% in (Recession is Imminent: We Need A Travel Ban NOW). In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. In this article, we will take a closer look at hedge fund sentiment towards Walker & Dunlop Inc. (NYSE:WD).

Hedge fund interest in Walker & Dunlop Inc. (NYSE:WD) shares was flat at the end of last quarter. This is usually a negative indicator. Our calculations also showed that WD isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings). The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as FibroGen Inc (NASDAQ:FGEN), Bandwidth Inc. (NASDAQ:BAND), and Outfront Media Inc (NYSE:OUT) to gather more data points.

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At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, Chuck Schumer recently stated that marijuana legalization will be a Senate priority. So, we are checking out this under the radar stock that will benefit from this. We go through lists like the 10 best battery stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our homepage. With all of this in mind let’s take a look at the new hedge fund action regarding Walker & Dunlop Inc. (NYSE:WD).

Do Hedge Funds Think WD Is A Good Stock To Buy Now?

At Q1’s end, a total of 19 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 0% from the fourth quarter of 2020. The graph below displays the number of hedge funds with bullish position in WD over the last 23 quarters. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Is WD A Good Stock To Buy?

The largest stake in Walker & Dunlop Inc. (NYSE:WD) was held by Royce & Associates, which reported holding $33.3 million worth of stock at the end of December. It was followed by Sabrepoint Capital with a $24.4 million position. Other investors bullish on the company included Arrowstreet Capital, Harspring Capital Management, and Millennium Management. In terms of the portfolio weights assigned to each position Sabrepoint Capital allocated the biggest weight to Walker & Dunlop Inc. (NYSE:WD), around 7.92% of its 13F portfolio. Precept Capital Management is also relatively very bullish on the stock, earmarking 2.73 percent of its 13F equity portfolio to WD.

Seeing as Walker & Dunlop Inc. (NYSE:WD) has faced falling interest from the entirety of the hedge funds we track, we can see that there lies a certain “tier” of hedgies that elected to cut their positions entirely in the first quarter. Intriguingly, Dmitry Balyasny’s Balyasny Asset Management cut the biggest stake of the 750 funds monitored by Insider Monkey, comprising close to $3.4 million in stock. Paul Tudor Jones’s fund, Tudor Investment Corp, also dumped its stock, about $0.3 million worth. These bearish behaviors are interesting, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Walker & Dunlop Inc. (NYSE:WD) but similarly valued. We will take a look at FibroGen Inc (NASDAQ:FGEN), Bandwidth Inc. (NASDAQ:BAND), Outfront Media Inc (NYSE:OUT), Wolverine World Wide, Inc. (NYSE:WWW), Trinity Industries, Inc. (NYSE:TRN), Empire State Realty OP, L.P. (NYSE:ESBA), and Cohen & Steers, Inc. (NYSE:CNS). This group of stocks’ market values are closest to WD’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
FGEN 18 246707 -3
BAND 24 267634 -7
OUT 41 745537 3
WWW 16 121591 2
TRN 28 987877 6
ESBA 1 114 1
CNS 17 84194 2
Average 20.7 350522 0.6

View table here if you experience formatting issues.

As you can see these stocks had an average of 20.7 hedge funds with bullish positions and the average amount invested in these stocks was $351 million. That figure was $110 million in WD’s case. Outfront Media Inc (NYSE:OUT) is the most popular stock in this table. On the other hand Empire State Realty OP, L.P. (NYSE:ESBA) is the least popular one with only 1 bullish hedge fund positions. Walker & Dunlop Inc. (NYSE:WD) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for WD is 50.3. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. 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 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 23.8% in 2021 through July 16th and surpassed the market again by 7.7 percentage points. Unfortunately WD wasn’t nearly as popular as these 5 stocks (hedge fund sentiment was quite bearish); WD investors were disappointed as the stock returned -1.6% since the end of March (through 7/16) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2021.

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