WESCO International (WCC): Hedge Fund Sentiment Reaches Another All Time High

We know that hedge funds generate strong, risk-adjusted returns over the long run, which is why imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, professional investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn’t mean that they don’t have occasional colossal losses; they do. However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, let’s examine the smart money sentiment towards WESCO International, Inc. (NYSE:WCC) and determine whether hedge funds skillfully traded this stock.

Is WESCO International, Inc. (NYSE:WCC) a buy here? Hedge funds were betting on the stock. The number of long hedge fund bets improved by 2 in recent months. WESCO International, Inc. (NYSE:WCC) was in 34 hedge funds’ portfolios at the end of June. The all time high for this statistics is 32. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that WCC 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.

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 56 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 34% through August 17th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

William Harnisch

William Harnisch of Peconic Partners LLC

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, this “mom” trader turned $2000 into $2 million within 2 years. So, we are checking out her best trade idea of the month. Cannabis stocks are roaring back in 2020, which is why we are also checking out this under-the-radar stock. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. 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. With all of this in mind let’s take a look at the latest hedge fund action surrounding WESCO International, Inc. (NYSE:WCC).

How have hedgies been trading WESCO International, Inc. (NYSE:WCC)?

At the end of the second quarter, a total of 34 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 6% from the first quarter of 2020. The graph below displays the number of hedge funds with bullish position in WCC over the last 20 quarters. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

The largest stake in WESCO International, Inc. (NYSE:WCC) was held by Leonard Green & Partners, which reported holding $87.8 million worth of stock at the end of September. It was followed by Diamond Hill Capital with a $77.9 million position. Other investors bullish on the company included Citadel Investment Group, AQR Capital Management, and Peconic Partners LLC. In terms of the portfolio weights assigned to each position Leonard Green & Partners allocated the biggest weight to WESCO International, Inc. (NYSE:WCC), around 16.37% of its 13F portfolio. Peconic Partners LLC is also relatively very bullish on the stock, designating 12.12 percent of its 13F equity portfolio to WCC.

As aggregate interest increased, key hedge funds were breaking ground themselves. Leonard Green & Partners, managed by Leonard Green, created the biggest position in WESCO International, Inc. (NYSE:WCC). Leonard Green & Partners had $87.8 million invested in the company at the end of the quarter. David Harding’s Winton Capital Management also initiated a $4 million position during the quarter. The following funds were also among the new WCC investors: Ira Unschuld’s Brant Point Investment Management, Jay Genzer’s Thames Capital Management, and David Nguyen and Nancy Oh’s One68 Global Capital.

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as WESCO International, Inc. (NYSE:WCC) but similarly valued. We will take a look at Euronav NV (NYSE:EURN), PennyMac Mortgage Investment Trust (NYSE:PMT), Madrigal Pharmaceuticals, Inc. (NASDAQ:MDGL), Moog Inc (NYSE:MOG), Chart Industries, Inc. (NASDAQ:GTLS), Independent Bank Group Inc (NASDAQ:IBTX), and InterDigital, Inc. (NASDAQ:IDCC). 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
EURN 17 93347 -16
PMT 15 124808 3
MDGL 15 435642 0
MOG 23 81342 3
GTLS 22 195025 1
IBTX 9 64774 -11
IDCC 23 355140 0
Average 17.7 192868 -2.9

View table here if you experience formatting issues.

As you can see these stocks had an average of 17.7 hedge funds with bullish positions and the average amount invested in these stocks was $193 million. That figure was $504 million in WCC’s case. Moog Inc (NYSE:MOG) is the most popular stock in this table. On the other hand Independent Bank Group Inc (NASDAQ:IBTX) is the least popular one with only 9 bullish hedge fund positions. Compared to these stocks WESCO International, Inc. (NYSE:WCC) is more popular among hedge funds. Our overall hedge fund sentiment score for WCC is 87. 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. 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 returned 33% in 2020 through the end of August but still managed to beat the market by 23.2 percentage points. Hedge funds were also right about betting on WCC as the stock returned 33.4% since the end of June 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.

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