During the fourth quarter the Russell 2000 ETF (IWM) lagged the larger S&P 500 ETF (SPY) by nearly 7 percentage points as investors worried over the possible ramifications of rising interest rates. The hedge funds and institutional investors we track typically invest more in smaller-cap stocks than an average investor (i.e. only 298 S&P 500 constituents were among the 500 most popular stocks among hedge funds), and we have seen data that shows those funds paring back their overall exposure. Those funds cutting positions in small-caps is one reason why volatility has increased. In the following paragraphs, we take a closer look at what hedge funds and prominent investors think of Weight Watchers International, Inc. (NASDAQ:WTW) and see how the stock is affected by the recent hedge fund activity.
Weight Watchers International, Inc. (NASDAQ:WTW) investors should pay attention to a decrease in hedge fund sentiment lately. Our calculations also showed that wtw isn’t among the 30 most popular stocks among hedge funds.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? 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 market by 32 percentage points since May 2014 through March 12, 2019 (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. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in our short portfolio.
Let’s analyze the new hedge fund action encompassing Weight Watchers International, Inc. (NASDAQ:WTW).
What does the smart money think about Weight Watchers International, Inc. (NASDAQ:WTW)?
At Q4’s end, a total of 23 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -26% from the previous quarter. On the other hand, there were a total of 32 hedge funds with a bullish position in WTW a year ago. With the smart money’s sentiment swirling, there exists a few noteworthy hedge fund managers who were increasing their stakes significantly (or already accumulated large positions).
Of the funds tracked by Insider Monkey, AQR Capital Management, managed by Cliff Asness, holds the most valuable position in Weight Watchers International, Inc. (NASDAQ:WTW). AQR Capital Management has a $41.3 million position in the stock, comprising less than 0.1%% of its 13F portfolio. Coming in second is Peter S. Park of Park West Asset Management, with a $34.7 million position; 1.7% of its 13F portfolio is allocated to the stock. Other members of the smart money that are bullish encompass Israel Englander’s Millennium Management, Ken Griffin’s Citadel Investment Group and Ted White and Christopher Kiper’s Legion Partners Asset Management.
Since Weight Watchers International, Inc. (NASDAQ:WTW) has experienced a decline in interest from the smart money, it’s easy to see that there was a specific group of money managers that elected to cut their positions entirely heading into Q3. It’s worth mentioning that Joel Ramin’s 12 West Capital Management dropped the biggest position of the 700 funds tracked by Insider Monkey, worth close to $66.8 million in stock, and D. E. Shaw’s D E Shaw was right behind this move, as the fund dumped about $30.6 million worth. These moves are important to note, as total hedge fund interest was cut by 8 funds heading into Q3.
Let’s check out hedge fund activity in other stocks similar to Weight Watchers International, Inc. (NASDAQ:WTW). These stocks are Coherent, Inc. (NASDAQ:COHR), AVX Corporation (NYSE:AVX), Canada Goose Holdings Inc. (NYSE:GOOS), and Five9 Inc (NASDAQ:FIVN). This group of stocks’ market values are closest to WTW’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 22.5 hedge funds with bullish positions and the average amount invested in these stocks was $217 million. That figure was $141 million in WTW’s case. Canada Goose Holdings Inc. (NYSE:GOOS) is the most popular stock in this table. On the other hand AVX Corporation (NYSE:AVX) is the least popular one with only 16 bullish hedge fund positions. Weight Watchers International, Inc. (NASDAQ:WTW) is not the most popular stock in this group but hedge fund interest is still above average. 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 15 most popular stocks) among hedge funds returned 24.2% through April 22nd and outperformed the S&P 500 ETF (SPY) by more than 7 percentage points. Unfortunately WTW wasn’t nearly as popular as these 15 stock and hedge funds that were betting on WTW were disappointed as the stock returned -53.8% and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 15 most popular stocks) among hedge funds as 13 of these stocks already outperformed the market this year.
Disclosure: None. This article was originally published at Insider Monkey.