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WESCO International, Inc. (WCC): Hedge Funds In Wait-and-See Mode

We are still in an overall bull market and many stocks that smart money investors were piling into surged through the end of November. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained 54% and 51% respectively. Hedge funds’ top 3 stock picks returned 41.7% this year and beat the S&P 500 ETFs by 14 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 WESCO International, Inc. (NYSE:WCC).

WESCO International, Inc. (NYSE:WCC) shares haven’t seen a lot of action during the third quarter. Overall, hedge fund sentiment was unchanged. The stock was in 18 hedge funds’ portfolios at the end of September. At the end of this article we will also compare WCC to other stocks including Workiva Inc (NYSE:WK), TowneBank (NASDAQ:TOWN), and Worthington Industries, Inc. (NYSE:WOR) to get a better sense of its popularity.
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

In the 21st century investor’s toolkit there are plenty of gauges investors employ to evaluate their holdings. A duo of the most under-the-radar gauges are hedge fund and insider trading activity. Our researchers have shown that, historically, those who follow the best picks of the best investment managers can beat the broader indices by a significant amount (see the details here).

Ric Dillon Diamond Hill Capital

Ric Dillon of Diamond Hill Capital

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. One of the most bullish analysts in America just put his money where his mouth is. He says, “I’m investing more today than I did back in early 2009.” So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We also rely on the best performing hedge funds‘ buy/sell signals. We’re going to take a peek at the key hedge fund action surrounding WESCO International, Inc. (NYSE:WCC).

How are hedge funds trading WESCO International, Inc. (NYSE:WCC)?

At the end of the third quarter, a total of 18 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 0% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards WCC over the last 17 quarters. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

More specifically, Blue Harbour Group was the largest shareholder of WESCO International, Inc. (NYSE:WCC), with a stake worth $190.6 million reported as of the end of September. Trailing Blue Harbour Group was AQR Capital Management, which amassed a stake valued at $87.2 million. Diamond Hill Capital, Polaris Capital Management, and Carlson Capital 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 Blue Harbour Group allocated the biggest weight to WESCO International, Inc. (NYSE:WCC), around 11.18% of its 13F portfolio. Polaris Capital Management is also relatively very bullish on the stock, earmarking 1.79 percent of its 13F equity portfolio to WCC.

Since WESCO International, Inc. (NYSE:WCC) has faced falling interest from the smart money, we can see that there exists a select few money managers that slashed their positions entirely in the third quarter. It’s worth mentioning that Alexander Mitchell’s Scopus Asset Management dumped the biggest stake of the “upper crust” of funds tracked by Insider Monkey, totaling close to $10.1 million in stock. Ian Simm’s fund, Impax Asset Management, also sold off its stock, about $3.7 million worth. These bearish behaviors are intriguing to say the least, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as WESCO International, Inc. (NYSE:WCC) but similarly valued. These stocks are Workiva Inc (NYSE:WK), TowneBank (NASDAQ:TOWN), Worthington Industries, Inc. (NYSE:WOR), and CommVault Systems, Inc. (NASDAQ:CVLT). This group of stocks’ market caps are similar to WCC’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
WK 19 172864 -1
TOWN 6 45663 -1
WOR 22 58920 9
CVLT 24 296800 5
Average 17.75 143562 3

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 $144 million. That figure was $446 million in WCC’s case. CommVault Systems, Inc. (NASDAQ:CVLT) is the most popular stock in this table. On the other hand TowneBank (NASDAQ:TOWN) is the least popular one with only 6 bullish hedge fund positions. WESCO International, Inc. (NYSE:WCC) is not the most popular stock in this group but hedge fund interest is still above average. 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 WCC, though not to the same extent, as the stock returned 10.2% during the first two months of the fourth quarter and outperformed the market as well.

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

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