With the third-quarter round of 13F filings behind us it is time to take a look at the stocks in which some of the best money managers in the world preferred to invest or sell heading into the fourth quarter. One of these stocks was WPP Plc (NYSE:WPP).
Is WPP a good stockto buy now? WPP has seen a decrease in enthusiasm from smart money recently. WPP Plc (NYSE:WPP) was in 7 hedge funds’ portfolios at the end of the third quarter of 2020. The all time high for this statistics is 11. There were 9 hedge funds in our database with WPP positions at the end of the second quarter. Our calculations also showed that WPP 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.
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 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’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 13% through November 17th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
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 15 best blue chip stocks to pick the best large-cap stocks to buy. 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 we’re going to analyze the recent hedge fund action regarding WPP Plc (NYSE:WPP).
What have hedge funds been doing with WPP Plc (NYSE:WPP)?
Heading into the fourth quarter of 2020, a total of 7 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -22% from the previous quarter. The graph below displays the number of hedge funds with bullish position in WPP over the last 21 quarters. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Arrowstreet Capital held the most valuable stake in WPP Plc (NYSE:WPP), which was worth $12.3 million at the end of the third quarter. On the second spot was Renaissance Technologies which amassed $10.7 million worth of shares. D E Shaw, Millennium Management, and Two Sigma Advisors 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 Arrowstreet Capital allocated the biggest weight to WPP Plc (NYSE:WPP), around 0.02% of its 13F portfolio. Renaissance Technologies is also relatively very bullish on the stock, setting aside 0.01 percent of its 13F equity portfolio to WPP.
Since WPP Plc (NYSE:WPP) has experienced falling interest from hedge fund managers, it’s easy to see that there exists a select few money managers who sold off their positions entirely heading into Q4. Intriguingly, Paul Marshall and Ian Wace’s Marshall Wace LLP dumped the largest position of all the hedgies followed by Insider Monkey, comprising close to $1.3 million in stock. Ronald Hua’s fund, Qtron Investments, also dumped its stock, about $0.4 million worth. These bearish behaviors are intriguing to say the least, as aggregate hedge fund interest fell by 2 funds heading into Q4.
Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as WPP Plc (NYSE:WPP) but similarly valued. We will take a look at PTC Inc (NASDAQ:PTC), InterContinental Hotels Group PLC (NYSE:IHG), Loews Corporation (NYSE:L), DENTSPLY SIRONA Inc. (NASDAQ:XRAY), Bio-Techne Corporation (NASDAQ:TECH), Albemarle Corporation (NYSE:ALB), and Ally Financial Inc (NYSE:ALLY). This group of stocks’ market caps resemble WPP’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 28.4 hedge funds with bullish positions and the average amount invested in these stocks was $676 million. That figure was $29 million in WPP’s case. Ally Financial Inc (NYSE:ALLY) is the most popular stock in this table. On the other hand InterContinental Hotels Group PLC (NYSE:IHG) is the least popular one with only 7 bullish hedge fund positions. Compared to these stocks WPP Plc (NYSE:WPP) is even less popular than IHG. Our overall hedge fund sentiment score for WPP is 22.1. 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. Hedge funds clearly dropped the ball on WPP as the stock delivered strong returns, though hedge funds’ consensus picks still generated respectable returns. 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. A small number of hedge funds were also right about betting on WPP as the stock returned 29.8% since Q3 (through December 2nd) and outperformed the market by an even larger margin.
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Disclosure: None. This article was originally published at Insider Monkey.