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WD-40 Company (WDFC): Hedge Funds Are In Wait-and-See Mode

At the end of February we announced the arrival of the first US recession since 2009 and we predicted that the market will decline by at least 20% in (Recession is Imminent: We Need A Travel Ban NOW). In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. In this article, we will take a closer look at hedge fund sentiment towards WD-40 Company (NASDAQ:WDFC).

Hedge fund interest in WD-40 Company (NASDAQ:WDFC) shares was flat at the end of last quarter. This is usually a negative indicator. At the end of this article we will also compare WDFC to other stocks including Livongo Health, Inc. (NASDAQ:LVGO), Cosan Limited (NYSE:CZZ), and Blackbaud, Inc. (NASDAQ:BLKB) to get a better sense of its popularity.

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 58 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 36% through May 18th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

SAC CAPITAL ADVISORS

Steven Cohen of Point72 Asset Management

We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world’s largest cannabis market, so we check out this European marijuana stock pitch. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind let’s take a look at the key hedge fund action encompassing WD-40 Company (NASDAQ:WDFC).

What have hedge funds been doing with WD-40 Company (NASDAQ:WDFC)?

Heading into the second quarter of 2020, a total of 17 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 0% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards WDFC over the last 18 quarters. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

The largest stake in WD-40 Company (NASDAQ:WDFC) was held by Renaissance Technologies, which reported holding $72.8 million worth of stock at the end of September. It was followed by VGI Partners with a $52.3 million position. Other investors bullish on the company included GLG Partners, Millennium Management, and Winton Capital Management. In terms of the portfolio weights assigned to each position VGI Partners allocated the biggest weight to WD-40 Company (NASDAQ:WDFC), around 5.63% of its 13F portfolio. Lyon Street Capital is also relatively very bullish on the stock, dishing out 1.6 percent of its 13F equity portfolio to WDFC.

Due to the fact that WD-40 Company (NASDAQ:WDFC) has witnessed a decline in interest from hedge fund managers, it’s easy to see that there exists a select few hedgies that elected to cut their full holdings in the first quarter. It’s worth mentioning that Minhua Zhang’s Weld Capital Management said goodbye to the biggest position of the “upper crust” of funds followed by Insider Monkey, valued at about $1 million in stock. Peter Muller’s fund, PDT Partners, also dumped its stock, about $0.3 million worth. These transactions are interesting, as total 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 WD-40 Company (NASDAQ:WDFC). We will take a look at Livongo Health, Inc. (NASDAQ:LVGO), Cosan Limited (NYSE:CZZ), Blackbaud, Inc. (NASDAQ:BLKB), and Sanderson Farms, Inc. (NASDAQ:SAFM). This group of stocks’ market values resemble WDFC’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
LVGO 17 82549 -1
CZZ 15 141907 3
BLKB 22 107618 6
SAFM 17 330385 -19
Average 17.75 165615 -2.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 17.75 hedge funds with bullish positions and the average amount invested in these stocks was $166 million. That figure was $200 million in WDFC’s case. Blackbaud, Inc. (NASDAQ:BLKB) is the most popular stock in this table. On the other hand Cosan Limited (NYSE:CZZ) is the least popular one with only 15 bullish hedge fund positions. WD-40 Company (NASDAQ:WDFC) is not the least popular stock in this group but hedge fund interest is still below average. 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 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 13.4% in 2020 through June 22nd and surpassed the market by 15.9 percentage points. Unfortunately WDFC wasn’t nearly as popular as these 10 stocks (hedge fund sentiment was quite bearish); WDFC investors were disappointed as the stock returned -3.4% during the second quarter and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.

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Disclosure: None. This article was originally published at Insider Monkey.