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Were Hedge Funds Right About Piling Into WillScot Corporation (WSC)?

We are still in an overall bull market and many stocks that smart money investors were piling into surged through October 17th. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained 45% and 39% respectively. Hedge funds’ top 3 stock picks returned 34.4% this year and beat the S&P 500 ETFs by 13 percentage points. Investing in index funds guarantees you average returns, not superior returns. We are looking to generate superior returns for our readers. That’s why we believe it isn’t a waste of time to check out hedge fund sentiment before you invest in a stock like WillScot Corporation (NASDAQ:WSC).

WillScot Corporation (NASDAQ:WSC) was in 23 hedge funds’ portfolios at the end of the second quarter of 2019. WSC investors should be aware of an increase in hedge fund sentiment in recent months. There were 22 hedge funds in our database with WSC positions at the end of the previous quarter. Our calculations also showed that WSC isn’t among the 30 most popular stocks among hedge funds (see the video below).
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that hedge funds’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the market by 40 percentage points since May 2014 through May 30, 2019 (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 25.7% through September 30, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

WSC_oct2019

Unlike former hedge manager, Dr. Steve Sjuggerud, who is convinced Dow will soar past 40000, our long-short investment strategy doesn’t rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. We’re going to take a glance at the key hedge fund action surrounding WillScot Corporation (NASDAQ:WSC).

How are hedge funds trading WillScot Corporation (NASDAQ:WSC)?

Heading into the third quarter of 2019, a total of 23 of the hedge funds tracked by Insider Monkey were long this stock, a change of 5% from one quarter earlier. On the other hand, there were a total of 31 hedge funds with a bullish position in WSC a year ago. With the smart money’s sentiment swirling, there exists an “upper tier” of noteworthy hedge fund managers who were adding to their stakes meaningfully (or already accumulated large positions).

Jay Petschek - Corsair Capital

When looking at the institutional investors followed by Insider Monkey, David Rosen’s Rubric Capital Management has the most valuable position in WillScot Corporation (NASDAQ:WSC), worth close to $40.2 million, amounting to 3.2% of its total 13F portfolio. The second largest stake is held by Selz Capital, led by Bernard Selz, holding a $18.2 million position; the fund has 4.9% of its 13F portfolio invested in the stock. Some other peers that hold long positions comprise Jay Petschek and Steven Major’s Corsair Capital Management, Jerome L. Simon’s Lonestar Capital Management and Richard Scott Greeder’s Broad Bay Capital.

With a general bullishness amongst the heavyweights, key hedge funds were leading the bulls’ herd. Broad Bay Capital, managed by Richard Scott Greeder, assembled the most valuable position in WillScot Corporation (NASDAQ:WSC). Broad Bay Capital had $15 million invested in the company at the end of the quarter. Peter S. Park’s Park West Asset Management also initiated a $7.5 million position during the quarter. The only other fund with a brand new WSC position is Renaissance Technologies.

Let’s also examine hedge fund activity in other stocks similar to WillScot Corporation (NASDAQ:WSC). We will take a look at Avon Products, Inc. (NYSE:AVP), Columbia Financial, Inc. (NASDAQ:CLBK), Tri Pointe Group Inc (NYSE:TPH), and CNOOC Limited (NYSE:CEO). This group of stocks’ market valuations are closest to WSC’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
AVP 18 310922 -4
CLBK 12 33342 4
TPH 17 175799 -1
CEO 9 257781 -4
Average 14 194461 -1.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 14 hedge funds with bullish positions and the average amount invested in these stocks was $194 million. That figure was $186 million in WSC’s case. Avon Products, Inc. (NYSE:AVP) is the most popular stock in this table. On the other hand CNOOC Limited (NYSE:CEO) is the least popular one with only 9 bullish hedge fund positions. Compared to these stocks WillScot Corporation (NASDAQ:WSC) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Hedge funds were also right about betting on WSC, though not to the same extent, as the stock returned 3.6% during the third quarter and outperformed the market as well.

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

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