Although the masses and most of the financial media blame hedge funds for their exorbitant fee structure and disappointing performance, these investors have proved to have great stock picking abilities over the years (that’s why their assets under management continue to swell). We believe hedge fund sentiment should serve as a crucial tool of an individual investor’s stock selection process, as it may offer great insights of how the brightest minds of the finance industry feel about specific stocks. After all, these people have access to smartest analysts and expensive data/information sources that individual investors can’t match. So should one consider investing in Wrap Technologies, Inc. (NASDAQ:WRTC)? The smart money sentiment can provide an answer to this question.
Wrap Technologies, Inc. (NASDAQ:WRTC) investors should be aware of a decrease in enthusiasm from smart money recently. Wrap Technologies, Inc. (NASDAQ:WRTC) was in 4 hedge funds’ portfolios at the end of the third quarter of 2020. The all time high for this statistics is 7. Our calculations also showed that WRTC 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.
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s monthly stock picks returned 113% since March 2017 and outperformed the S&P 500 ETFs by more than 66 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a 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 10 most profitable companies in the world 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. With all of this in mind we’re going to take a look at the new hedge fund action surrounding Wrap Technologies, Inc. (NASDAQ:WRTC).
Hedge fund activity in Wrap Technologies, Inc. (NASDAQ:WRTC)
At third quarter’s end, a total of 4 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -43% from one quarter earlier. By comparison, 0 hedge funds held shares or bullish call options in WRTC a year ago. With the smart money’s capital changing hands, there exists a select group of key hedge fund managers who were adding to their stakes meaningfully (or already accumulated large positions).
According to Insider Monkey’s hedge fund database, Kamunting Street Capital, managed by Allan Teh, holds the largest position in Wrap Technologies, Inc. (NASDAQ:WRTC). Kamunting Street Capital has a $4.2 million position in the stock, comprising 2.6% of its 13F portfolio. The second largest stake is held by Kamunting Street Capital, managed by Allan Teh, which holds a $3.4 million call position; 2.1% of its 13F portfolio is allocated to the stock. Other professional money managers with similar optimism contain Ken Griffin’s Citadel Investment Group, Ken Griffin’s Citadel Investment Group and Michael Gelband’s ExodusPoint Capital. In terms of the portfolio weights assigned to each position Kamunting Street Capital allocated the biggest weight to Wrap Technologies, Inc. (NASDAQ:WRTC), around 2.61% of its 13F portfolio. Kamunting Street Capital is also relatively very bullish on the stock, dishing out 2.12 percent of its 13F equity portfolio to WRTC.
Seeing as Wrap Technologies, Inc. (NASDAQ:WRTC) has witnessed declining sentiment from the aggregate hedge fund industry, it’s easy to see that there is a sect of fund managers who were dropping their entire stakes last quarter. Interestingly, Jeff Osher’s No Street Capital sold off the biggest investment of all the hedgies followed by Insider Monkey, worth an estimated $6.3 million in stock, and Nick Thakore’s Diametric Capital was right behind this move, as the fund said goodbye to about $0.2 million worth. These bearish behaviors are interesting, as total hedge fund interest was cut by 3 funds last quarter.
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Wrap Technologies, Inc. (NASDAQ:WRTC) but similarly valued. These stocks are Ciner Resources LP (NYSE:CINR), ChromaDex Corporation (NASDAQ:CDXC), Financial Institutions, Inc. (NASDAQ:FISI), Franklin Covey Co. (NYSE:FC), Investors Title Company (NASDAQ:ITIC), Party City Holdco Inc (NYSE:PRTY), and Gold Standard Ventures Corp (NYSE:GSV). This group of stocks’ market caps are similar to WRTC’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 7.6 hedge funds with bullish positions and the average amount invested in these stocks was $20 million. That figure was $5 million in WRTC’s case. Party City Holdco Inc (NYSE:PRTY) is the most popular stock in this table. On the other hand Ciner Resources LP (NYSE:CINR) is the least popular one with only 1 bullish hedge fund positions. Wrap Technologies, Inc. (NASDAQ:WRTC) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for WRTC is 32.8. 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. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. 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 30.7% in 2020 through November 27th and surpassed the market again by 16.1 percentage points. Unfortunately WRTC wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); WRTC investors were disappointed as the stock returned -13.9% since the end of September (through 11/27) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.
Disclosure: None. This article was originally published at Insider Monkey.