Is Waddell & Reed Financial, Inc. (NYSE:WDR) a good bet right now? We like to analyze hedge fund sentiment before doing days of in-depth research. We do so because hedge funds and other elite investors have numerous Ivy league graduates, expert network advisers, and supply chain tipsters working or consulting for them. There is not a shortage of news stories covering failed hedge fund investments (for some reason media paid a ton of attention to Ackman’s gigantic JC Penney and Valeant failures) and it is a fact that hedge funds’ picks don’t beat the market 100% of the time, but their consensus picks have historically done very well and have outperformed the market after adjusting for risk.
Waddell & Reed Financial, Inc. (NYSE:WDR) has seen an increase in hedge fund interest lately. 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 SunPower Corporation (NASDAQ:SPWR), John Wiley & Sons Inc (NYSE:JW), and Columbia Property Trust Inc (NYSE:CXP) to gather more data points.
To most investors, hedge funds are perceived as unimportant, old investment vehicles of yesteryear. While there are over 8000 funds in operation at present, Our researchers look at the elite of this group, around 700 funds. These investment experts administer the majority of the hedge fund industry’s total asset base, and by keeping track of their top stock picks, Insider Monkey has deciphered a few investment strategies that have historically defeated the broader indices. Insider Monkey’s small-cap hedge fund strategy outrun the S&P 500 index by 12 percentage points annually for a decade in their back tests.
Now, we’re going to take a look at the latest action surrounding Waddell & Reed Financial, Inc. (NYSE:WDR).
How are hedge funds trading Waddell & Reed Financial, Inc. (NYSE:WDR)?
Heading into Q4, a total of 16 of the hedge funds tracked by Insider Monkey were long this stock, an increase of 23% from the second quarter. With the smart money’s positions undergoing their usual ebb and flow, there exists a select group of key hedge fund managers who were boosting their holdings considerably (or already accumulated large positions).
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Fisher Asset Management, managed by Ken Fisher, holds the most valuable position in Waddell & Reed Financial, Inc. (NYSE:WDR). Fisher Asset Management has a $67 million position in the stock, comprising 0.1% of its 13F portfolio. On Fisher Asset Management’s heels is Royce & Associates, led by Chuck Royce, holding a $54.5 million position; 0.3% of its 13F portfolio is allocated to the company. Some other hedge funds and institutional investors that hold long positions encompass Mario Gabelli’s GAMCO Investors, Joel Greenblatt’s Gotham Asset Management, and Cliff Asness’ AQR Capital Management.
As one would reasonably expect, key hedge funds have jumped into Waddell & Reed Financial, Inc. (NYSE:WDR) headfirst. Dreman Value Management, managed by David Dreman, initiated the largest position in Waddell & Reed Financial, Inc. (NYSE:WDR). Dreman Value Management had $5.2 million invested in the company at the end of the quarter. Millennium Management Subsidiary’s Blue Arrow Capital Management also initiated a $1.7 million position during the quarter. The other funds with new positions in the stock are Andrew Feldstein and Stephen Siderow’s Blue Mountain Capital, Ray Dalio’s Bridgewater Associates, and Matthew Tewksbury’s Stevens Capital Management.
Let’s check out hedge fund activity in other stocks similar to Waddell & Reed Financial, Inc. (NYSE:WDR). These stocks are SunPower Corporation (NASDAQ:SPWR), John Wiley & Sons Inc (NYSE:JW), Columbia Property Trust Inc (NYSE:CXP), and Targa Resources Corp (NYSE:TRGP). This group of stocks’ market caps matches Waddell & Reed Financial, Inc. (NYSE:WDR)’s market cap.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
As you can see, these stocks had an average of 17 hedge funds with bullish positions and the average amount invested in these stocks was $180 million. That figure was $173 million in Waddell & Reed Financial, Inc. (NYSE:WDR)’s case. Targa Resources Corp (NYSE:TRGP) is the most popular stock in this table. On the other hand, Columbia Property Trust Inc (NYSE:CXP) is the least popular one with only 9 bullish hedge fund positions. Waddell & Reed Financial, Inc. (NYSE:WDR) 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. In this regard, Targa Resources Corp (NYSE:TRGP) might be a better candidate to consider a long position.