The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We at Insider Monkey have plowed through 817 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds’ and investors’ portfolio positions as of September 30th, about a month before the elections. In this article we look at what those investors think of Walker & Dunlop Inc. (NYSE:WD).
Is WD a good stock to buy now? Walker & Dunlop Inc. (NYSE:WD) shareholders have witnessed a decrease in hedge fund sentiment in recent months. Walker & Dunlop Inc. (NYSE:WD) was in 17 hedge funds’ portfolios at the end of September. The all time high for this statistic is 25. Our calculations also showed that WD isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video for a quick look at the top 5 stocks).
Video: Watch our video about the top 5 most popular hedge fund stocks.
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’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by 66 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 15 best blue chip stocks to pick the best large-cap stocks to buy. 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 website. Now let’s take a look at the new hedge fund action encompassing Walker & Dunlop Inc. (NYSE:WD).
Do Hedge Funds Think WD Is A Good Stock To Buy Now?
At third quarter’s end, a total of 17 of the hedge funds tracked by Insider Monkey were long this stock, a change of -6% from the previous quarter. On the other hand, there were a total of 16 hedge funds with a bullish position in WD a year ago. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Walker & Dunlop Inc. (NYSE:WD) was held by Sabrepoint Capital, which reported holding $15.9 million worth of stock at the end of September. It was followed by Royce & Associates with a $14.6 million position. Other investors bullish on the company included Harspring Capital Management, No Street Capital, and Alyeska Investment Group. In terms of the portfolio weights assigned to each position Sabrepoint Capital allocated the biggest weight to Walker & Dunlop Inc. (NYSE:WD), around 5.67% of its 13F portfolio. Harspring Capital Management is also relatively very bullish on the stock, earmarking 2.5 percent of its 13F equity portfolio to WD.
Seeing as Walker & Dunlop Inc. (NYSE:WD) has experienced bearish sentiment from the entirety of the hedge funds we track, it’s safe to say that there is a sect of money managers that slashed their positions entirely heading into Q4. It’s worth mentioning that Dmitry Balyasny’s Balyasny Asset Management cut the biggest investment of the “upper crust” of funds tracked by Insider Monkey, worth close to $1.2 million in stock, and Noam Gottesman’s GLG Partners was right behind this move, as the fund cut about $1.1 million worth. These moves are interesting, as aggregate hedge fund interest dropped by 1 funds heading into Q4.
Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Walker & Dunlop Inc. (NYSE:WD) but similarly valued. These stocks are Madison Square Garden Entertainment Corp. (NYSE:MSGE), Veoneer, Inc. (NYSE:VNE), Pebblebrook Hotel Trust (NYSE:PEB), Mueller Water Products, Inc. (NYSE:MWA), Navient Corp (NASDAQ:NAVI), Uniqure NV (NASDAQ:QURE), and Amarin Corporation plc (NASDAQ:AMRN). This group of stocks’ market values are closest to WD’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 23.6 hedge funds with bullish positions and the average amount invested in these stocks was $249 million. That figure was $72 million in WD’s case. Uniqure NV (NASDAQ:QURE) is the most popular stock in this table. On the other hand Pebblebrook Hotel Trust (NYSE:PEB) is the least popular one with only 9 bullish hedge fund positions. Walker & Dunlop Inc. (NYSE:WD) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for WD is 39.2. 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. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 30.7% in 2020 through December 14th and still beat the market by 15.8 percentage points. A small number of hedge funds were also right about betting on WD as the stock returned 65.2% since the end of the third quarter (through 12/14) and outperformed the market by an even larger margin.
Disclosure: None. This article was originally published at Insider Monkey.