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Here’s What Hedge Funds Think About WhiteHorse Finance, Inc. (WHF)

We are still in an overall bull market and many stocks that smart money investors were piling into surged through November 22nd. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained 52% and 49% respectively. Hedge funds’ top 3 stock picks returned 39.1% this year and beat the S&P 500 ETFs by nearly 13 percentage points. Investing in index funds guarantees you average returns, not superior returns. We are looking to generate superior returns for our readers. That’s why we believe it isn’t a waste of time to check out hedge fund sentiment before you invest in a stock like WhiteHorse Finance, Inc. (NASDAQ:WHF).

Is WhiteHorse Finance, Inc. (NASDAQ:WHF) the right pick for your portfolio? The smart money is in a pessimistic mood. The number of bullish hedge fund positions decreased by 2 in recent months. Our calculations also showed that WHF isn’t among the 30 most popular stocks among hedge funds. WHF was in 3 hedge funds’ portfolios at the end of September. There were 5 hedge funds in our database with WHF positions 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 Russell 2000 ETFs by 40 percentage points since May 2014 (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 27.8% through November 21, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Paul Marshall Marshall Wace

Paul Marshall of Marshall Wace

Unlike the largest US hedge funds that are convinced Dow will soar past 40,000 or the world’s most bearish hedge fund that’s more convinced than ever that a crash is coming, our long-short investment strategy doesn’t rely on bull or bear markets to deliver double digit returns. We only rely on the best performing hedge funds‘ buy/sell signals. We’re going to take a look at the fresh hedge fund action regarding WhiteHorse Finance, Inc. (NASDAQ:WHF).

What have hedge funds been doing with WhiteHorse Finance, Inc. (NASDAQ:WHF)?

At Q3’s end, a total of 3 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -40% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards WHF over the last 17 quarters. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

WHF_nov2019

According to Insider Monkey’s hedge fund database, Two Sigma Advisors, managed by John Overdeck and David Siegel, holds the biggest position in WhiteHorse Finance, Inc. (NASDAQ:WHF). Two Sigma Advisors has a $1.6 million position in the stock, comprising less than 0.1%% of its 13F portfolio. The second most bullish fund manager is Marshall Wace, led by Paul Marshall and Ian Wace, holding a $1 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. In terms of the portfolio weights assigned to each position Bulldog Investors allocated the biggest weight to WhiteHorse Finance, Inc. (NASDAQ:WHF), around 0.22% of its portfolio. Marshall Wace is also relatively very bullish on the stock, setting aside 0.01 percent of its 13F equity portfolio to WHF.

Seeing as WhiteHorse Finance, Inc. (NASDAQ:WHF) has experienced a decline in interest from the smart money, logic holds that there were a few money managers that elected to cut their full holdings heading into Q4. Interestingly, Israel Englander’s Millennium Management sold off the largest position of the 750 funds followed by Insider Monkey, totaling an estimated $0.5 million in stock. Ken Griffin’s fund, Citadel Investment Group, also sold off its stock, about $0.2 million worth. These bearish behaviors are important to note, as total hedge fund interest fell by 2 funds heading into Q4.

Let’s also examine hedge fund activity in other stocks similar to WhiteHorse Finance, Inc. (NASDAQ:WHF). These stocks are Fiesta Restaurant Group Inc (NASDAQ:FRGI), ViewRay, Inc. (NASDAQ:VRAY), Solar Senior Capital Ltd (NASDAQ:SUNS), and Parker Drilling Company (NYSE:PKD). This group of stocks’ market values resemble WHF’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
FRGI 14 103176 0
VRAY 20 103713 3
SUNS 3 1058 2
PKD 4 91367 0
Average 10.25 74829 1.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 10.25 hedge funds with bullish positions and the average amount invested in these stocks was $75 million. That figure was $3 million in WHF’s case. ViewRay, Inc. (NASDAQ:VRAY) is the most popular stock in this table. On the other hand Solar Senior Capital Ltd (NASDAQ:SUNS) is the least popular one with only 3 bullish hedge fund positions. Compared to these stocks WhiteHorse Finance, Inc. (NASDAQ:WHF) is even less popular than SUNS. Hedge funds dodged a bullet by taking a bearish stance towards WHF. Our calculations showed that the top 20 most popular hedge fund stocks returned 34.7% in 2019 through November 22nd and outperformed the S&P 500 ETF (SPY) by 8.5 percentage points. Unfortunately WHF wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); WHF investors were disappointed as the stock returned 3.3% during the fourth quarter (through 11/22) 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 70 percent of these stocks already outperformed the market so far in Q4.

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

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