Is WhiteHorse Finance, Inc. (WHF) A Good Stock To Buy?

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 821 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 March 31st, a week after the market trough. In this article we look at what those investors think of WhiteHorse Finance, Inc. (NASDAQ:WHF).

WhiteHorse Finance, Inc. (NASDAQ:WHF) investors should pay attention to a decrease in hedge fund interest recently. Our calculations also showed that WHF isn’t among the 30 most popular stocks among hedge funds (click for Q1 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 was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 58 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’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 36% through May 18th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Bruce Kovner, Caxton Associates LP

Bruce Kovner of Caxton Associates LP

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, 2020’s unprecedented market conditions provide us with the highest number of trading opportunities in a decade. So we are checking out stocks recommended/scorned by legendary Bill Miller. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind we’re going to take a glance at the latest hedge fund action encompassing WhiteHorse Finance, Inc. (NASDAQ:WHF).

Hedge fund activity in WhiteHorse Finance, Inc. (NASDAQ:WHF)

Heading into the second quarter of 2020, a total of 5 of the hedge funds tracked by Insider Monkey were long this stock, a change of -38% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards WHF over the last 18 quarters. With hedge funds’ capital changing hands, there exists a select group of noteworthy hedge fund managers who were boosting their holdings substantially (or already accumulated large positions).

Is WHF A Good Stock To Buy?

More specifically, Two Sigma Advisors was the largest shareholder of WhiteHorse Finance, Inc. (NASDAQ:WHF), with a stake worth $1.6 million reported as of the end of September. Trailing Two Sigma Advisors was Caxton Associates LP, which amassed a stake valued at $0.5 million. Millennium Management, Citadel Investment Group, and First Pacific Advisors LLC 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 Caxton Associates LP allocated the biggest weight to WhiteHorse Finance, Inc. (NASDAQ:WHF), around 0.1% of its 13F portfolio. Two Sigma Advisors is also relatively very bullish on the stock, setting aside 0.01 percent of its 13F equity portfolio to WHF.

Judging by the fact that WhiteHorse Finance, Inc. (NASDAQ:WHF) has experienced declining sentiment from the entirety of the hedge funds we track, it’s easy to see that there were a few money managers that decided to sell off their positions entirely heading into Q4. At the top of the heap, Phillip Goldstein, Andrew Dakos and Steven Samuels’s Bulldog Investors said goodbye to the largest position of the 750 funds watched by Insider Monkey, totaling close to $1.5 million in stock, and Paul Marshall and Ian Wace’s Marshall Wace LLP was right behind this move, as the fund dropped about $1.4 million worth. These bearish behaviors are intriguing to say the least, as total hedge fund interest dropped by 3 funds heading into Q4.

Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as WhiteHorse Finance, Inc. (NASDAQ:WHF) but similarly valued. These stocks are Metalla Royalty & Streaming Ltd. (NYSE:MTA), NL Industries, Inc. (NYSE:NL), Monroe Capital Corp (NASDAQ:MRCC), and Timkensteel Corp (NYSE:TMST). This group of stocks’ market valuations resemble WHF’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
MTA 1 518 1
NL 3 738 0
MRCC 4 2273 -1
TMST 11 8154 -1
Average 4.75 2921 -0.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 4.75 hedge funds with bullish positions and the average amount invested in these stocks was $3 million. That figure was $3 million in WHF’s case. Timkensteel Corp (NYSE:TMST) is the most popular stock in this table. On the other hand Metalla Royalty & Streaming Ltd. (NYSE:MTA) is the least popular one with only 1 bullish hedge fund positions. WhiteHorse Finance, Inc. (NASDAQ:WHF) is not the most popular stock in this group but hedge fund interest is still above average. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 8.3% in 2020 through the end of May but still beat the market by 13.2 percentage points. Hedge funds were also right about betting on WHF as the stock returned 37.9% in Q2 (through the end of May) and outperformed the market. Hedge funds were rewarded for their relative bullishness.

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