With the third-quarter round of 13F filings behind us it is time to take a look at the stocks in which some of the best money managers in the world preferred to invest or sell heading into the fourth quarter. One of these stocks was Wolverine World Wide, Inc. (NYSE:WWW).
Hedge fund interest in Wolverine World Wide, Inc. (NYSE:WWW) shares was flat at the end of last quarter. This is usually a negative indicator. Our calculations also showed that WWW isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video for a quick look at the top 5 stocks). The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Gibraltar Industries Inc (NASDAQ:ROCK), Telephone & Data Systems, Inc. (NYSE:TDS), and The Simply Good Foods Company (NASDAQ:SMPL) to gather more data points.
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 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 66 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.
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 15 best blue chip stocks 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. 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 website. Keeping this in mind we’re going to check out the new hedge fund action encompassing Wolverine World Wide, Inc. (NYSE:WWW).
Do Hedge Funds Think WWW Is A Good Stock To Buy Now?
At Q3’s end, a total of 17 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 0% from the second quarter of 2020. On the other hand, there were a total of 21 hedge funds with a bullish position in WWW a year ago. With hedgies’ sentiment swirling, there exists a few notable hedge fund managers who were increasing their stakes meaningfully (or already accumulated large positions).
The largest stake in Wolverine World Wide, Inc. (NYSE:WWW) was held by Diamond Hill Capital, which reported holding $27.4 million worth of stock at the end of September. It was followed by Royce & Associates with a $13.3 million position. Other investors bullish on the company included Ancora Advisors, GLG Partners, and GAMCO Investors. In terms of the portfolio weights assigned to each position Ancora Advisors allocated the biggest weight to Wolverine World Wide, Inc. (NYSE:WWW), around 0.5% of its 13F portfolio. Invenomic Capital Management is also relatively very bullish on the stock, designating 0.18 percent of its 13F equity portfolio to WWW.
Due to the fact that Wolverine World Wide, Inc. (NYSE:WWW) has experienced falling interest from hedge fund managers, we can see that there lies a certain “tier” of money managers who were dropping their full holdings in the third quarter. Intriguingly, Robert Joseph Caruso’s Select Equity Group cut the largest stake of the “upper crust” of funds watched by Insider Monkey, totaling about $1.8 million in stock. David Harding’s fund, Winton Capital Management, also sold off its stock, about $1.5 million worth. These transactions are important to note, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).
Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Wolverine World Wide, Inc. (NYSE:WWW) but similarly valued. These stocks are Gibraltar Industries Inc (NASDAQ:ROCK), Telephone & Data Systems, Inc. (NYSE:TDS), The Simply Good Foods Company (NASDAQ:SMPL), Outfront Media Inc. (REIT) (NYSE:OUT), Renewable Energy Group Inc (NASDAQ:REGI), Taro Pharmaceutical Industries Ltd. (NYSE:TARO), and ESCO Technologies Inc. (NYSE:ESE). This group of stocks’ market values match WWW’s market value.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
View table here if you experience formatting issues.
As you can see these stocks had an average of 22.3 hedge funds with bullish positions and the average amount invested in these stocks was $191 million. That figure was $76 million in WWW’s case. Outfront Media Inc. (REIT) (NYSE:OUT) is the most popular stock in this table. On the other hand Taro Pharmaceutical Industries Ltd. (NYSE:TARO) is the least popular one with only 9 bullish hedge fund positions. Wolverine World Wide, Inc. (NYSE:WWW) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for WWW is 42. 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 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 30.7% in 2020 through December 14th and still beat the market by 15.8 percentage points. A small number of hedge funds were also right about betting on WWW as the stock returned 18% since the end of the third quarter (through 12/14) and outperformed the market by an even larger margin.
Disclosure: None. This article was originally published at Insider Monkey.