The government requires hedge funds and wealthy investors with over a certain portfolio size to file a report that shows their positions at the end of every quarter. Even though it isn’t the intention, these filings level the playing field for ordinary investors. The latest round of 13F filings disclosed the funds’ positions on September 30. We at Insider Monkey have made an extensive database of more than 700 of those elite funds and prominent investors’ filings. In this article, we analyze how these elite funds and prominent investors traded Workiva Inc (NYSE:WK) based on those filings.
Workiva Inc (NYSE:WK) shares haven’t seen a lot of action during the third quarter. Overall, hedge fund sentiment was unchanged. The stock was in 15 hedge funds’ portfolios at the end of September. At the end of this article we will also compare WK to other stocks including Actuant Corporation (NYSE:ATU), Calavo Growers, Inc. (NASDAQ:CVGW), and MRC Global Inc (NYSE:MRC) to get a better sense of its popularity.
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 18 percentage points since May 2014 through December 3, 2018 (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 latest hedge fund action regarding Workiva Inc (NYSE:WK).
What have hedge funds been doing with Workiva Inc (NYSE:WK)?
At the end of the third quarter, a total of 15 of the hedge funds tracked by Insider Monkey held long positions in this stock, no change from the second quarter of 2018. The graph below displays the number of hedge funds with bullish position in WK over the last 13 quarters. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Workiva Inc (NYSE:WK) was held by Renaissance Technologies, which reported holding $50.4 million worth of stock at the end of September. It was followed by Hawk Ridge Management with a $22.1 million position. Other investors bullish on the company included Citadel Investment Group, Millennium Management, and Arrowstreet Capital.
Since Workiva Inc (NYSE:WK) has faced falling interest from the aggregate hedge fund industry, logic holds that there exists a select few fund managers that slashed their positions entirely heading into Q3. At the top of the heap, Matthew Hulsizer’s PEAK6 Capital Management dumped the largest investment of all the hedgies followed by Insider Monkey, comprising an estimated $0.5 million in stock. Noam Gottesman’s fund, GLG Partners, also dropped its stock, about $0.3 million worth. These transactions are interesting, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).
Let’s go over hedge fund activity in other stocks similar to Workiva Inc (NYSE:WK). These stocks are Actuant Corporation (NYSE:ATU), Calavo Growers, Inc. (NASDAQ:CVGW), MRC Global Inc (NYSE:MRC), and Qudian Inc. (NYSE:QD). All of these stocks’ market caps are closest to WK’s market cap.
|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 12.75 hedge funds with bullish positions and the average amount invested in these stocks was $148 million. That figure was $158 million in WK’s case. MRC Global Inc (NYSE:MRC) is the most popular stock in this table. On the other hand Qudian Inc. (NYSE:QD) is the least popular one with only 6 bullish hedge fund positions. Workiva Inc (NYSE:WK) 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. In this regard MRC might be a better candidate to consider a long position.
Disclosure: None. This article was originally published at Insider Monkey.