Where Do Hedge Funds Stand On ContextLogic Inc. (WISH)?

Before we spend countless hours researching a company, we like to analyze what insiders, hedge funds and billionaire investors think of the stock first. This is a necessary first step in our investment process because our research has shown that the elite investors’ consensus returns have been exceptional. In the following paragraphs, we find out what the billionaire investors and hedge funds think of ContextLogic Inc. (NASDAQ:WISH).

ContextLogic Inc. (NASDAQ:WISH) was in 25 hedge funds’ portfolios at the end of March. The all time high for this statistic was previously 24. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. WISH has experienced an increase in activity from the world’s largest hedge funds recently. There were 24 hedge funds in our database with WISH positions at the end of the fourth quarter. Our calculations also showed that WISH isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings).

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 has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by 115 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 underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.

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At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, economists warn of inflation flare up. So, we are checking out this backdoor gold play that has hit peak gains of 718% in a little over a year. We go through lists like the 10 best battery stocks to pick the next Tesla that will deliver a 10x return. 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 homepage. With all of this in mind we’re going to review the fresh hedge fund action encompassing ContextLogic Inc. (NASDAQ:WISH).

Do Hedge Funds Think WISH Is A Good Stock To Buy Now?

At the end of the first quarter, a total of 25 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 4% from the fourth quarter of 2020. By comparison, 1 hedge funds held shares or bullish call options in WISH a year ago. With hedgies’ positions undergoing their usual ebb and flow, there exists an “upper tier” of key hedge fund managers who were adding to their holdings meaningfully (or already accumulated large positions).

More specifically, JS Capital was the largest shareholder of ContextLogic Inc. (NASDAQ:WISH), with a stake worth $131.9 million reported as of the end of March. Trailing JS Capital was Third Point, which amassed a stake valued at $59.6 million. Matrix Capital Management, Islet Management, and Citadel Investment Group 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 JS Capital allocated the biggest weight to ContextLogic Inc. (NASDAQ:WISH), around 6.82% of its 13F portfolio. Proem Advisors is also relatively very bullish on the stock, setting aside 2.94 percent of its 13F equity portfolio to WISH.

With a general bullishness amongst the heavyweights, key money managers were breaking ground themselves. Matrix Capital Management, managed by David Goel and Paul Ferri, created the most outsized position in ContextLogic Inc. (NASDAQ:WISH). Matrix Capital Management had $15.8 million invested in the company at the end of the quarter. Joseph Samuels’s Islet Management also initiated a $15.8 million position during the quarter. The following funds were also among the new WISH investors: Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital, Dmitry Balyasny’s Balyasny Asset Management, and Imran Khan’s Proem Advisors.

Let’s now review hedge fund activity in other stocks similar to ContextLogic Inc. (NASDAQ:WISH). We will take a look at Bruker Corporation (NASDAQ:BRKR), Arrival (NASDAQ:ARVL), CF Industries Holdings, Inc. (NYSE:CF), Americold Realty Trust (NYSE:COLD), Coca-Cola FEMSA, S.A.B. de C.V. (NYSE:KOF), Reliance Steel & Aluminum Co. (NYSE:RS), and Algonquin Power & Utilities Corp. (NYSE:AQN). This group of stocks’ market caps are closest to WISH’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
BRKR 22 219602 -1
ARVL 14 164035 14
CF 44 879911 2
COLD 16 804690 -13
KOF 10 404064 4
RS 18 284275 -9
AQN 10 172616 -5
Average 19.1 418456 -1.1

View table here if you experience formatting issues.

As you can see these stocks had an average of 19.1 hedge funds with bullish positions and the average amount invested in these stocks was $418 million. That figure was $297 million in WISH’s case. CF Industries Holdings, Inc. (NYSE:CF) is the most popular stock in this table. On the other hand Coca-Cola FEMSA, S.A.B. de C.V. (NYSE:KOF) is the least popular one with only 10 bullish hedge fund positions. ContextLogic Inc. (NASDAQ:WISH) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for WISH is 58.1. 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 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 24% in 2021 through July 9th and beat the market again by 6.7 percentage points. Unfortunately WISH wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on WISH were disappointed as the stock returned -29.5% since the end of March (through 7/9) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as many of these stocks already outperformed the market since 2019.

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