Looking for high-potential stocks? Just follow the big players within the hedge fund industry. Why should you do so? Let’s take a brief look at what statistics have to say about hedge funds’ stock picking abilities to illustrate. The Standard and Poor’s 500 Index returned approximately 5.2% in the 12 months ending October 30, with more than 51% of the stocks in the index failing to beat the benchmark. Therefore, the odds that one will pin down a winner by randomly picking a stock are less than the odds in a fair coin-tossing game. Conversely, hedge funds’ 30 preferred S&P 500 stocks (as of September 2014) generated a return of 9.5% during the same 12-month period, with 63% of these stock picks outperformed the broader market benchmark. Coincidence? It might happen to be so, but it is unlikely. Our research covering a 16-year period indicates that hedge funds’ stock picks generate superior risk-adjusted returns. That’s why we believe it is wise to check hedge fund activity before you invest your time or your savings on a stock like Wi-LAN Inc – US listing (NASDAQ:WILN).
Hedge fund interest in Wi-LAN Inc – US listing (NASDAQ:WILN) 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 WILN to other stocks including Horizon Bancorp (NASDAQ:HBNC), XenoPort, Inc. (NASDAQ:XNPT), and Rigel Pharmaceuticals, Inc. (NASDAQ:RIGL) to get a better sense of its popularity.
With all of this in mind, let’s take a glance at the latest action regarding Wi-LAN Inc – US listing (NASDAQ:WILN).
How are hedge funds trading Wi-LAN Inc – US listing (NASDAQ:WILN)?
When looking at the institutional investors followed by Insider Monkey, Jim Simons’s Renaissance Technologies has the most valuable position in Wi-LAN Inc – US listing (NASDAQ:WILN), worth close to $1 million, amounting to less than 0.1% of its total 13F portfolio. The second largest stake is held by AQR Capital Management, led by Cliff Asness, holding a $0.5 million position; the fund has less than 0.1% of its 13F portfolio invested in the stock. Some other professional money managers with similar optimism contain Israel Englander’s Millennium Management, D E Shaw and Gavin Saitowitz and Cisco J. del Valle’s Springbok Capital.
We view hedge fund activity in the stock unfavorable, but in this case there was only a single hedge fund selling its entire position: Bryn Mawr Capital. One hedge fund selling its entire position doesn’t always imply a bearish intent. Theoretically a hedge fund may decide to sell a promising position in order to invest the proceeds in a more promising idea. However, we don’t think this is the case in this case because only one of the 700+ hedge funds tracked by Insider Monkey identified as a viable investment and initiated a position in the stock (that fund was Springbok Capital).
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Wi-LAN Inc – US listing (NASDAQ:WILN) but similarly valued. These stocks are Horizon Bancorp (NASDAQ:HBNC), XenoPort, Inc. (NASDAQ:XNPT), Rigel Pharmaceuticals, Inc. (NASDAQ:RIGL), and Harte-Hanks, Inc. (NYSE:HHS). All of these stocks’ market caps are closest to WILN’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| HBNC | 4 | 4462 | 2 |
| XNPT | 14 | 83585 | -2 |
| RIGL | 17 | 48415 | 1 |
| HHS | 14 | 12261 | 3 |
As you can see these stocks had an average of 12.25 hedge funds with bullish positions and the average amount invested in these stocks was $37 million. That figure was $2 million in WILN’s case. Rigel Pharmaceuticals, Inc. (NASDAQ:RIGL) is the most popular stock in this table. On the other hand Horizon Bancorp (NASDAQ:HBNC) is the least popular one with only 4 bullish hedge fund positions. Wi-LAN Inc – US listing (NASDAQ:WILN) 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. In this regard RIGL might be a better candidate to consider a long position.