Is Winmark Corporation (WINA) Going to Burn These Hedge Funds?

Insider Monkey has processed numerous 13F filings of hedge funds and successful value investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds’ and successful investors’ positions as of the end of the first quarter. You can find articles about an individual hedge fund’s trades on numerous financial news websites. However, in this article we will take a look at their collective moves over the last 4.5 years and analyze what the smart money thinks of Winmark Corporation (NASDAQ:WINA) based on that data and determine whether they were really smart about the stock.

Is Winmark Corporation (NASDAQ:WINA) undervalued? The smart money was taking a pessimistic view. The number of bullish hedge fund bets decreased by 1 lately. Our calculations also showed that WINA 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). WINA was in 11 hedge funds’ portfolios at the end of March. There were 12 hedge funds in our database with WINA holdings at the end of the previous quarter.

Video: Watch our video about the top 5 most popular hedge fund stocks.

If you’d ask most investors, hedge funds are seen as worthless, old investment vehicles of the past. While there are more than 8000 funds with their doors open at present, Our researchers choose to focus on the leaders of this group, approximately 850 funds. These money managers watch over most of the hedge fund industry’s total capital, and by monitoring their highest performing equity investments, Insider Monkey has found several investment strategies that have historically outstripped the S&P 500 index. Insider Monkey’s flagship short hedge fund strategy outperformed the S&P 500 short ETFs by around 20 percentage points per annum since its inception in March 2017. Our portfolio of short stocks lost 36% since February 2017 (through May 18th) even though the market was up 30% during the same period. We just shared a list of 8 short targets in our latest quarterly update .


Israel Englander of Millennium Management

At Insider Monkey we scour multiple sources to uncover the next great investment idea. There is a lot of volatility in the markets and this presents amazing investment opportunities from time to time. For example, this trader claims to deliver juiced up returns with one trade a week, so we are checking out his highest conviction idea. A second trader claims to score lucrative profits by utilizing a “weekend trading strategy”, so we look into his strategy’s picks. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We recently recommended several stocks partly inspired by legendary Bill Miller’s investor letter. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 in February after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind we’re going to take a look at the fresh hedge fund action encompassing Winmark Corporation (NASDAQ:WINA).

What have hedge funds been doing with Winmark Corporation (NASDAQ:WINA)?

At the end of the first quarter, a total of 11 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -8% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards WINA over the last 18 quarters. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Is WINA A Good Stock To Buy?

The largest stake in Winmark Corporation (NASDAQ:WINA) was held by Nine Ten Partners, which reported holding $40.4 million worth of stock at the end of September. It was followed by Renaissance Technologies with a $26.5 million position. Other investors bullish on the company included AltraVue Capital, Millennium Management, and Arrowstreet Capital. In terms of the portfolio weights assigned to each position Nine Ten Partners allocated the biggest weight to Winmark Corporation (NASDAQ:WINA), around 16.13% of its 13F portfolio. AltraVue Capital is also relatively very bullish on the stock, setting aside 1.99 percent of its 13F equity portfolio to WINA.

Due to the fact that Winmark Corporation (NASDAQ:WINA) has witnessed bearish sentiment from the smart money, it’s safe to say that there were a few money managers that decided to sell off their entire stakes in the first quarter. Interestingly, D. E. Shaw’s D E Shaw dumped the largest stake of the 750 funds monitored by Insider Monkey, totaling close to $0.3 million in stock. Mike Vranos’s fund, Ellington, also cut its stock, about $0.2 million worth. These moves are interesting, as aggregate hedge fund interest dropped by 1 funds in the first quarter.

Let’s now take a look at hedge fund activity in other stocks similar to Winmark Corporation (NASDAQ:WINA). These stocks are Veeco Instruments Inc. (NASDAQ:VECO), Textainer Group Holdings Limited (NYSE:TGH), DRDGOLD Ltd. (NYSE:DRD), and Clovis Oncology Inc (NASDAQ:CLVS). All of these stocks’ market caps are similar to WINA’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
VECO 14 238257 -1
TGH 11 14043 -2
DRD 2 7055 -1
CLVS 13 38106 -2
Average 10 74365 -1.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 10 hedge funds with bullish positions and the average amount invested in these stocks was $74 million. That figure was $77 million in WINA’s case. Veeco Instruments Inc. (NASDAQ:VECO) is the most popular stock in this table. On the other hand DRDGOLD Ltd. (NYSE:DRD) is the least popular one with only 2 bullish hedge fund positions. Winmark Corporation (NASDAQ:WINA) 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 12.3% in 2020 through June 30th but still beat the market by 15.5 percentage points. Hedge funds were also right about betting on WINA as the stock returned 34.4% in Q2 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.