Here’s What Hedge Funds Think About Weight Watchers International, Inc. (WW)

Before we spend days researching a stock idea we’d like to take a look at how hedge funds and billionaire investors recently traded that stock. S&P 500 Index ETF (SPY) lost 2.6% in the first two months of the second quarter. Ten out of 11 industry groups in the S&P 500 Index lost value in May. The average return of a randomly picked stock in the index was even worse (-3.6%). This means you (or a monkey throwing a dart) have less than an even chance of beating the market by randomly picking a stock. On the other hand, the top 20 most popular S&P 500 stocks among hedge funds not only generated positive returns but also outperformed the index by about 3 percentage points through May 30th. In this article, we will take a look at what hedge funds think about Weight Watchers International, Inc. (NASDAQ:WW).

Is Weight Watchers International, Inc. (NASDAQ:WW) a buy right now? Prominent investors are in a bearish mood. The number of long hedge fund positions fell by 3 lately. Our calculations also showed that ww isn’t among the 30 most popular stocks among hedge funds. WW was in 20 hedge funds’ portfolios at the end of the first quarter of 2019. There were 23 hedge funds in our database with WW holdings at the end of the previous quarter.

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’ 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 30.9% through May 30, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

D. E. Shaw

Let’s take a look at the fresh hedge fund action encompassing Weight Watchers International, Inc. (NASDAQ:WW).

How are hedge funds trading Weight Watchers International, Inc. (NASDAQ:WW)?

At the end of the first quarter, a total of 20 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -13% from the previous quarter. By comparison, 32 hedge funds held shares or bullish call options in WW a year ago. With the smart money’s sentiment swirling, there exists a select group of key hedge fund managers who were upping their stakes significantly (or already accumulated large positions).

No of Hedge Funds with WW Positions

The largest stake in Weight Watchers International, Inc. (NASDAQ:WW) was held by AQR Capital Management, which reported holding $52.9 million worth of stock at the end of March. It was followed by Renaissance Technologies with a $38.7 million position. Other investors bullish on the company included D E Shaw, Stadium Capital Management, and Millennium Management.

Since Weight Watchers International, Inc. (NASDAQ:WW) has witnessed declining sentiment from the entirety of the hedge funds we track, it’s safe to say that there lies a certain “tier” of hedge funds who were dropping their positions entirely by the end of the third quarter. Intriguingly, Peter S. Park’s Park West Asset Management said goodbye to the biggest investment of the 700 funds tracked by Insider Monkey, comprising close to $34.7 million in stock, and Ted White and Christopher Kiper’s Legion Partners Asset Management was right behind this move, as the fund said goodbye to about $9.8 million worth. These moves are intriguing to say the least, as aggregate hedge fund interest fell by 3 funds by the end of the third quarter.

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Weight Watchers International, Inc. (NASDAQ:WW) but similarly valued. These stocks are Corcept Therapeutics Incorporated (NASDAQ:CORT), Cardiovascular Systems Inc (NASDAQ:CSII), EnPro Industries, Inc. (NYSE:NPO), and Kite Realty Group Trust (NYSE:KRG). This group of stocks’ market valuations are closest to WW’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
CORT 18 132235 -1
CSII 18 119140 -3
NPO 17 146717 2
KRG 6 38694 -1
Average 14.75 109197 -0.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 14.75 hedge funds with bullish positions and the average amount invested in these stocks was $109 million. That figure was $210 million in WW’s case. Corcept Therapeutics Incorporated (NASDAQ:CORT) is the most popular stock in this table. On the other hand Kite Realty Group Trust (NYSE:KRG) is the least popular one with only 6 bullish hedge fund positions. Compared to these stocks Weight Watchers International, Inc. (NASDAQ:WW) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 1.9% in Q2 through May 30th and outperformed the S&P 500 ETF (SPY) by more than 3 percentage points. Unfortunately WW wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on WW were disappointed as the stock returned -13% during the same period 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 13 of these stocks already outperformed the market in Q2.

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