Before putting in our own effort and resources into finding a good investment, we can quickly utilize hedge fund expertise to give us a quick glimpse of whether that stock could make for a good addition to our portfolios. The odds are not exactly stacked in investors’ favor when it comes to beating the market, as evidenced by the fact that less than 49% of the stocks in the S&P 500 did so during the third quarter. The stats were even worse in recent years when most of the advances in the market were due to large gains by FAANG stocks. However, one bright side for individual investors was the strong performance of hedge funds’ top consensus picks. This year hedge funds’ top 20 stock picks outperformed the S&P 500 Index by 4 percentage points through September 30th. Thus, we can see that the tireless research and efforts of hedge funds to identify winning stocks can work to our advantage when we know how to use the data. While not all of their picks will be winners, our odds are much better following their best stock picks than trying to go it alone.
Welbilt, Inc. (NYSE:WBT) shareholders have witnessed a decrease in enthusiasm from smart money lately. WBT was in 25 hedge funds’ portfolios at the end of June. There were 27 hedge funds in our database with WBT positions at the end of the previous quarter. Our calculations also showed that WBT isn’t among the 30 most popular stocks among hedge funds (see the video below).
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
To most shareholders, hedge funds are perceived as underperforming, outdated financial vehicles of yesteryear. While there are more than 8000 funds trading today, We look at the leaders of this club, around 750 funds. These investment experts handle the majority of the hedge fund industry’s total asset base, and by monitoring their first-class equity investments, Insider Monkey has unsheathed numerous investment strategies that have historically surpassed the market. Insider Monkey’s flagship hedge fund strategy outpaced the S&P 500 index by around 5 percentage points annually since its inception in May 2014. We were able to generate large returns even by identifying short candidates. Our portfolio of short stocks lost 25.7% since February 2017 (through September 30th) even though the market was up more than 33% during the same period. We just shared a list of 10 short targets in our latest quarterly update .
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 review the recent hedge fund action surrounding Welbilt, Inc. (NYSE:WBT).
Hedge fund activity in Welbilt, Inc. (NYSE:WBT)
Heading into the third quarter of 2019, a total of 25 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -7% from one quarter earlier. On the other hand, there were a total of 20 hedge funds with a bullish position in WBT a year ago. With the smart money’s positions undergoing their usual ebb and flow, there exists a few key hedge fund managers who were upping their holdings significantly (or already accumulated large positions).
More specifically, Icahn Capital LP was the largest shareholder of Welbilt, Inc. (NYSE:WBT), with a stake worth $168.4 million reported as of the end of March. Trailing Icahn Capital LP was Impax Asset Management, which amassed a stake valued at $142.4 million. Select Equity Group, Gates Capital Management, and Scopia Capital were also very fond of the stock, giving the stock large weights in their portfolios.
Due to the fact that Welbilt, Inc. (NYSE:WBT) 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 fund managers who were dropping their entire stakes last quarter. It’s worth mentioning that Robert Joseph Caruso’s Select Equity Group cut the largest position of all the hedgies followed by Insider Monkey, worth an estimated $10.4 million in stock, and Matthew Hulsizer’s PEAK6 Capital Management was right behind this move, as the fund said goodbye to about $4.5 million worth. These moves are important to note, as aggregate hedge fund interest fell by 2 funds last quarter.
Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Welbilt, Inc. (NYSE:WBT) but similarly valued. These stocks are PDC Energy Inc (NASDAQ:PDCE), Penn National Gaming, Inc (NASDAQ:PENN), CommVault Systems, Inc. (NASDAQ:CVLT), and KB Home (NYSE:KBH). This group of stocks’ market values are closest to WBT’s market value.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
View table here if you experience formatting issues.
As you can see these stocks had an average of 17.5 hedge funds with bullish positions and the average amount invested in these stocks was $324 million. That figure was $850 million in WBT’s case. Penn National Gaming, Inc (NASDAQ:PENN) is the most popular stock in this table. On the other hand PDC Energy Inc (NASDAQ:PDCE) is the least popular one with only 14 bullish hedge fund positions. Compared to these stocks Welbilt, Inc. (NYSE:WBT) is more popular among hedge funds. 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 WBT wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on WBT were disappointed as the stock returned 1% 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 in Q3.
Disclosure: None. This article was originally published at Insider Monkey.