The financial regulations require hedge funds and wealthy investors that exceeded the $100 million equity holdings threshold to file a report that shows their positions at the end of every quarter. Even though it isn’t the intention, these filings to a certain extent level the playing field for ordinary investors. The latest round of 13F filings disclosed the funds’ positions on September 30th. We at Insider Monkey have made an extensive database of nearly 750 of those established hedge funds and famous value investors’ filings. In this article, we analyze how these elite funds and prominent investors traded WW International, Inc. (NASDAQ:WW) based on those filings.
Is WW International, Inc. (NASDAQ:WW) a bargain? Prominent investors are betting on the stock. The number of long hedge fund positions inched up by 7 recently. Our calculations also showed that WW isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings). WW isn’t very popular among ETF sponsors, though one notable holder is The Obesity ETF (NASDAQ:SLIM) with a 2.6% weight.
Video: Click the image to 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 Russell 2000 ETFs by 40 percentage points since May 2014 (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.
Unlike the largest US hedge funds that are convinced Dow will soar past 40,000 or the world’s most bearish hedge fund that’s more convinced than ever that a crash is coming, our long-short investment strategy doesn’t rely on bull or bear markets to deliver double digit returns. We only rely on the best performing hedge funds‘ buy/sell signals. We’re going to analyze the key hedge fund action encompassing WW International, Inc. (NASDAQ:WW).
What have hedge funds been doing with WW International, Inc. (NASDAQ:WW)?
At Q3’s end, a total of 28 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 33% from one quarter earlier. By comparison, 31 hedge funds held shares or bullish call options in WW a year ago. With the smart money’s sentiment swirling, there exists an “upper tier” of key hedge fund managers who were boosting their stakes significantly (or already accumulated large positions).
Among these funds, Eminence Capital held the most valuable stake in WW International, Inc. (NASDAQ:WW), which was worth $162.6 million at the end of the third quarter. On the second spot was Empyrean Capital Partners which amassed $79.3 million worth of shares. D E Shaw, AQR Capital Management, and Citadel Investment Group 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 Stadium Capital Management allocated the biggest weight to WW International, Inc. (NASDAQ:WW), around 7.35% of its portfolio. Empyrean Capital Partners is also relatively very bullish on the stock, earmarking 4.13 percent of its 13F equity portfolio to WW.
As industrywide interest jumped, key hedge funds were leading the bulls’ herd. Eminence Capital, managed by Ricky Sandler, created the most outsized position in WW International, Inc. (NASDAQ:WW). Eminence Capital had $162.6 million invested in the company at the end of the quarter. Michael A. Price and Amos Meron’s Empyrean Capital Partners also made a $79.3 million investment in the stock during the quarter. The following funds were also among the new WW investors: David E. Shaw’s D E Shaw, Cliff Asness’s AQR Capital Management, and Ken Griffin’s Citadel Investment Group.
Let’s now take a look at hedge fund activity in other stocks similar to WW International, Inc. (NASDAQ:WW). These stocks are Quidel Corporation (NASDAQ:QDEL), International Bancshares Corp (NASDAQ:IBOC), Rogers Corporation (NYSE:ROG), and Inovalon Holdings Inc (NASDAQ:INOV). This group of stocks’ market caps resemble WW’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 15 hedge funds with bullish positions and the average amount invested in these stocks was $84 million. That figure was $537 million in WW’s case. Rogers Corporation (NYSE:ROG) is the most popular stock in this table. On the other hand Inovalon Holdings Inc (NASDAQ:INOV) is the least popular one with only 11 bullish hedge fund positions. Compared to these stocks WW International, Inc. (NASDAQ:WW) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Hedge funds were also right about betting on WW as the stock returned 14.5% during the first two months of Q4 and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.
Disclosure: None. This article was originally published at Insider Monkey.