Out of thousands of stocks that are currently traded on the market, it is difficult to identify those that will really generate strong returns. Hedge funds and institutional investors spend millions of dollars on analysts with MBAs and PhDs, who are industry experts and well connected to other industry and media insiders on top of that. Individual investors can piggyback the hedge funds employing these talents and can benefit from their vast resources and knowledge in that way. We analyze quarterly 13F filings of nearly 817 hedge funds and, by looking at the smart money sentiment that surrounds a stock, we can determine whether it has the potential to beat the market over the long-term. Therefore, let’s take a closer look at what smart money thinks about Washington Prime Group Inc. (NYSE:WPG).
Is WPG a good stock to buy now? The best stock pickers were in a bearish mood. The number of long hedge fund positions fell by 9 in recent months. Washington Prime Group Inc. (NYSE:WPG) was in 8 hedge funds’ portfolios at the end of September. The all time high for this statistics is 22. Our calculations also showed that WPG 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.
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 S&P 500 ETFs by more than 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. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.
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 5 best cheap stocks to buy according to Ray Dalio to identify stocks with upside potential. 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. With all of this in mind let’s take a peek at the key hedge fund action encompassing Washington Prime Group Inc. (NYSE:WPG).
What does smart money think about Washington Prime Group Inc. (NYSE:WPG)?
At Q3’s end, a total of 8 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -53% from the second quarter of 2020. The graph below displays the number of hedge funds with bullish position in WPG over the last 21 quarters. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Washington Prime Group Inc. (NYSE:WPG) was held by Arrowstreet Capital, which reported holding $1.7 million worth of stock at the end of September. It was followed by Balyasny Asset Management with a $1.4 million position. Other investors bullish on the company included Millennium Management, Winton Capital Management, and Paloma Partners. In terms of the portfolio weights assigned to each position Balyasny Asset Management allocated the biggest weight to Washington Prime Group Inc. (NYSE:WPG), around 0.01% of its 13F portfolio. Winton Capital Management is also relatively very bullish on the stock, earmarking 0.01 percent of its 13F equity portfolio to WPG.
Judging by the fact that Washington Prime Group Inc. (NYSE:WPG) has faced declining sentiment from the entirety of the hedge funds we track, it’s safe to say that there were a few fund managers that decided to sell off their full holdings last quarter. It’s worth mentioning that Cliff Asness’s AQR Capital Management dumped the biggest stake of all the hedgies monitored by Insider Monkey, comprising close to $1 million in stock. Renaissance Technologies, also said goodbye to its stock, about $1 million worth. These transactions are intriguing to say the least, as aggregate hedge fund interest fell by 9 funds last quarter.
Let’s go over hedge fund activity in other stocks similar to Washington Prime Group Inc. (NYSE:WPG). These stocks are Level One Bancorp, Inc. (NASDAQ:LEVL), Oconee Federal Financial (NASDAQ:OFED), Lazydays Holdings, Inc. (NASDAQ:LAZY), Eagle Bancorp Montana Inc (NASDAQ:EBMT), Asure Software Inc (NASDAQ:ASUR), Evans Bancorp Inc. (NYSE:EVBN), and DHI Group Inc. (NYSE:DHX). This group of stocks’ market values resemble WPG’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 5.1 hedge funds with bullish positions and the average amount invested in these stocks was $10 million. That figure was $4 million in WPG’s case. DHI Group Inc. (NYSE:DHX) is the most popular stock in this table. On the other hand Level One Bancorp, Inc. (NASDAQ:LEVL) is the least popular one with only 2 bullish hedge fund positions. Washington Prime Group Inc. (NYSE:WPG) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for WPG is 40.2. 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 31.6% in 2020 through December 2nd and still beat the market by 16 percentage points. Hedge funds were also right about betting on WPG as the stock returned 74.7% since the end of Q3 (through 12/2) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
Disclosure: None. This article was originally published at Insider Monkey.