Welbilt, Inc. (WBT): Hedge Funds Taking Some Chips Off The Table

The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We at Insider Monkey have plowed through 823 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds’ and investors’ portfolio positions as of June 30th, when the S&P 500 Index was trading around the 3100 level. Stocks kept going up since then. In this article we look at how hedge funds traded Welbilt, Inc. (NYSE:WBT) and determine whether the smart money was really smart about this stock.

Welbilt, Inc. (NYSE:WBT) has experienced a decrease in enthusiasm from smart money in recent months. Welbilt, Inc. (NYSE:WBT) was in 22 hedge funds’ portfolios at the end of June. The all time high for this statistics is 28. Our calculations also showed that WBT isn’t among the 30 most popular stocks among hedge funds (click for Q2 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 101% since March 2017 and outperformed the S&P 500 ETFs by more than 56 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.

Jeffrey Gates of Gates Capital

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 precious metals prices. So, we are checking out this lithium company which could also benefit from the electric car adoption. 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. 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 to get excerpts of these letters in your inbox. Now we’re going to view the recent hedge fund action regarding Welbilt, Inc. (NYSE:WBT).

Hedge fund activity in Welbilt, Inc. (NYSE:WBT)

At the end of the second quarter, a total of 22 of the hedge funds tracked by Insider Monkey were long this stock, a change of -12% from the first quarter of 2020. The graph below displays the number of hedge funds with bullish position in WBT over the last 20 quarters. With hedge funds’ capital changing hands, there exists a select group of noteworthy hedge fund managers who were upping their stakes meaningfully (or already accumulated large positions).

When looking at the institutional investors followed by Insider Monkey, Icahn Capital LP, managed by Carl Icahn, holds the most valuable position in Welbilt, Inc. (NYSE:WBT). Icahn Capital LP has a $72.7 million position in the stock, comprising 0.4% of its 13F portfolio. Coming in second is Ian Simm of Impax Asset Management, with a $59.8 million position; the fund has 0.6% of its 13F portfolio invested in the stock. Remaining hedge funds and institutional investors that are bullish encompass Jeffrey Gates’s Gates Capital Management, D. E. Shaw’s D E Shaw and Robert Joseph Caruso’s Select Equity Group. In terms of the portfolio weights assigned to each position 13D Management allocated the biggest weight to Welbilt, Inc. (NYSE:WBT), around 1.78% of its 13F portfolio. Gates Capital Management is also relatively very bullish on the stock, dishing out 1.25 percent of its 13F equity portfolio to WBT.

Since Welbilt, Inc. (NYSE:WBT) has witnessed declining sentiment from the entirety of the hedge funds we track, logic holds that there exists a select few fund managers that elected to cut their entire stakes by the end of the second quarter. Intriguingly, Phill Gross and Robert Atchinson’s Adage Capital Management dumped the largest investment of the 750 funds tracked by Insider Monkey, totaling an estimated $12.3 million in stock, and Greg Eisner’s Engineers Gate Manager was right behind this move, as the fund cut about $1.3 million worth. These moves are interesting, as aggregate hedge fund interest fell by 3 funds by the end of the second quarter.

Let’s go over hedge fund activity in other stocks similar to Welbilt, Inc. (NYSE:WBT). We will take a look at American Finance Trust, Inc. (NASDAQ:AFIN), American Axle & Manufacturing Holdings, Inc. (NYSE:AXL), Precigen, Inc. (NASDAQ:PGEN), NexPoint Residential Trust Inc (NYSE:NXRT), Atara Biotherapeutics Inc (NASDAQ:ATRA), Piper Sandler Companies (NYSE:PIPR), and Primoris Services Corp (NASDAQ:PRIM). This group of stocks’ market caps resemble WBT’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
AFIN 10 12218 0
AXL 20 72878 -2
PGEN 15 53978 2
NXRT 13 69108 2
ATRA 22 523096 5
PIPR 13 34068 1
PRIM 19 74332 8
Average 16 119954 2.3

View table here if you experience formatting issues.

As you can see these stocks had an average of 16 hedge funds with bullish positions and the average amount invested in these stocks was $120 million. That figure was $204 million in WBT’s case. Atara Biotherapeutics Inc (NASDAQ:ATRA) is the most popular stock in this table. On the other hand American Finance Trust, Inc. (NASDAQ:AFIN) is the least popular one with only 10 bullish hedge fund positions. Welbilt, Inc. (NYSE:WBT) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for WBT is 75.6. 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 positive signal but 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 24.8% in 2020 through the end of September and beat the market by 19.3 percentage points. Unfortunately WBT wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on WBT were disappointed as the stock returned 1.1% in Q3 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 many of these stocks already outperformed the market so far this year.

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