Is Warner Music Group Corp. (WMG) A Good Stock To Buy?

The 800+ hedge funds and famous money managers tracked by Insider Monkey have already compiled and submitted their 13F filings for the first quarter, which unveil their equity positions as of March 31st. We went through these filings, fixed typos and other more significant errors and identified the changes in hedge fund portfolios. Our extensive review of these public filings is finally over, so this article is set to reveal the smart money sentiment towards Warner Music Group Corp. (NASDAQ:WMG).

Is WMG a good stock to buy? Warner Music Group Corp. (NASDAQ:WMG) has experienced a decrease in support from the world’s most elite money managers lately. Warner Music Group Corp. (NASDAQ:WMG) was in 27 hedge funds’ portfolios at the end of the first quarter of 2021. The all time high for this statistic is 31. Our calculations also showed that WMG isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings).

To the average investor there are dozens of methods stock traders can use to analyze stocks. A couple of the most useful methods are hedge fund and insider trading moves. We have shown that, historically, those who follow the top picks of the best hedge fund managers can beat the market by a healthy margin (see the details here). Also, our monthly newsletter’s portfolio of long stock picks returned 206.8% since March 2017 (through May 2021) and beat the S&P 500 Index by more than 115 percentage points. You can download a sample issue of this newsletter on our website .

Dmitry Balyasny of Balyasny Asset Managemnet

Dmitry Balyasny of Balyasny Asset Management

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, economists warn of inflation flare up. So, we are checking out this backdoor gold play that has hit peak gains of 718% in a little over a year. 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. Keeping this in mind we’re going to check out the fresh hedge fund action encompassing Warner Music Group Corp. (NASDAQ:WMG).

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

At Q1’s end, a total of 27 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -7% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in WMG over the last 23 quarters. With hedgies’ capital changing hands, there exists a select group of notable hedge fund managers who were upping their holdings substantially (or already accumulated large positions).

Is WMG A Good Stock To Buy?

More specifically, OZ Management was the largest shareholder of Warner Music Group Corp. (NASDAQ:WMG), with a stake worth $147.5 million reported as of the end of March. Trailing OZ Management was Darsana Capital Partners, which amassed a stake valued at $144.4 million. SoMa Equity Partners, Slate Path Capital, and Shannon River Fund Management were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Marlowe Partners allocated the biggest weight to Warner Music Group Corp. (NASDAQ:WMG), around 13.41% of its 13F portfolio. Zeno Research is also relatively very bullish on the stock, dishing out 9.95 percent of its 13F equity portfolio to WMG.

Judging by the fact that Warner Music Group Corp. (NASDAQ:WMG) has faced bearish sentiment from the smart money, it’s safe to say that there is a sect of money managers that elected to cut their full holdings last quarter. Intriguingly, Brandon Haley’s Holocene Advisors dropped the biggest stake of the 750 funds watched by Insider Monkey, comprising close to $72.8 million in stock. Gaurav Kapadia’s fund, XN Exponent Advisors, also cut its stock, about $31.4 million worth. These transactions are important to note, as aggregate hedge fund interest fell by 2 funds last quarter.

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Warner Music Group Corp. (NASDAQ:WMG) but similarly valued. These stocks are Logitech International SA (NASDAQ:LOGI), Extra Space Storage, Inc. (NYSE:EXR), CureVac N.V. (NASDAQ:CVAC), SK Telecom Co., Ltd. (NYSE:SKM), Ulta Beauty, Inc. (NASDAQ:ULTA), Shinhan Financial Group Co., Ltd. (NYSE:SHG), and NVR, Inc. (NYSE:NVR). This group of stocks’ market values match WMG’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
LOGI 15 311298 -6
EXR 28 185472 -1
CVAC 9 36312 0
SKM 8 113876 4
ULTA 46 1438287 3
SHG 6 29688 -1
NVR 39 1261359 -7
Average 21.6 482327 -1.1

View table here if you experience formatting issues.

As you can see these stocks had an average of 21.6 hedge funds with bullish positions and the average amount invested in these stocks was $482 million. That figure was $839 million in WMG’s case. Ulta Beauty, Inc. (NASDAQ:ULTA) is the most popular stock in this table. On the other hand Shinhan Financial Group Co., Ltd. (NYSE:SHG) is the least popular one with only 6 bullish hedge fund positions. Warner Music Group Corp. (NASDAQ:WMG) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for WMG is 55.4. 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 positive signal but 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 24% in 2021 through July 9th and beat the market again by 6.7 percentage points. Unfortunately WMG wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on WMG were disappointed as the stock returned 9.4% since the end of March (through 7/9) 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 many of these stocks already outperformed the market since 2019.

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