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Winnebago Industries, Inc. (WGO): Are Hedge Funds Right About This Stock?

“Since 2006, value stocks (IVE vs IVW) have underperformed 11 of the 13 calendar years and when they beat growth, it wasn’t by much. Cumulatively, through this week, it has been a 122% differential (up 52% for value vs up 174% for growth). This appears to be the longest and most severe drought for value investors since data collection began. It will go our way eventually as there are too many people paying far too much for today’s darlings, both public and private. Further, the ten-year yield of 2.5% (pre-tax) isn’t attractive nor is real estate. We believe the value part of the global equity market is the only place to earn solid risk adjusted returns and we believe those returns will be higher than normal,” said Vilas Fund in its Q1 investor letter. We aren’t sure whether value stocks outperform growth, but we follow hedge fund investor letters to understand where the markets and stocks might be going. This article will lay out and discuss the hedge fund and institutional investor sentiment towards Winnebago Industries, Inc. (NYSE:WGO).

Winnebago Industries, Inc. (NYSE:WGO) investors should pay attention to an increase in support from the world’s most elite money managers of late. WGO was in 15 hedge funds’ portfolios at the end of September. There were 13 hedge funds in our database with WGO positions at the end of the previous quarter. Our calculations also showed that WGO isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings).
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to 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 Russell 2000 ETFs by 40 percentage points since May 2014 (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.

Noam Gottesman GLG Partners

Noam Gottesman of GLG Partners

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 look at the recent hedge fund action encompassing Winnebago Industries, Inc. (NYSE:WGO).

What have hedge funds been doing with Winnebago Industries, Inc. (NYSE:WGO)?

At Q3’s end, a total of 15 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 15% from one quarter earlier. By comparison, 17 hedge funds held shares or bullish call options in WGO a year ago. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Among these funds, Punch Card Capital held the most valuable stake in Winnebago Industries, Inc. (NYSE:WGO), which was worth $53.4 million at the end of the third quarter. On the second spot was Royce & Associates which amassed $26.9 million worth of shares. Waratah Capital Advisors, Intrinsic Edge Capital, and Renaissance Technologies 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 Punch Card Capital allocated the biggest weight to Winnebago Industries, Inc. (NYSE:WGO), around 26.4% of its 13F portfolio. Waratah Capital Advisors is also relatively very bullish on the stock, earmarking 1.31 percent of its 13F equity portfolio to WGO.

As one would reasonably expect, key money managers have jumped into Winnebago Industries, Inc. (NYSE:WGO) headfirst. Waratah Capital Advisors, managed by Brad Dunkley and Blair Levinsky, created the largest position in Winnebago Industries, Inc. (NYSE:WGO). Waratah Capital Advisors had $13 million invested in the company at the end of the quarter. Mark Coe’s Intrinsic Edge Capital also made a $11.7 million investment in the stock during the quarter. The following funds were also among the new WGO investors: Renaissance Technologies, Noam Gottesman’s GLG Partners, and Matthew Hulsizer’s PEAK6 Capital Management.

Let’s go over hedge fund activity in other stocks similar to Winnebago Industries, Inc. (NYSE:WGO). These stocks are B&G Foods, Inc. (NYSE:BGS), Sandy Spring Bancorp Inc. (NASDAQ:SASR), Sleep Number Corporation (NASDAQ:SNBR), and Arch Coal, Inc. (NYSE:ARCH). This group of stocks’ market values match WGO’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
BGS 16 134329 -4
SASR 16 86930 1
SNBR 16 164083 0
ARCH 26 298997 -1
Average 18.5 171085 -1

View table here if you experience formatting issues.

As you can see these stocks had an average of 18.5 hedge funds with bullish positions and the average amount invested in these stocks was $171 million. That figure was $127 million in WGO’s case. Arch Coal, Inc. (NYSE:ARCH) is the most popular stock in this table. On the other hand B&G Foods, Inc. (NYSE:BGS) is the least popular one with only 16 bullish hedge fund positions. Compared to these stocks Winnebago Industries, Inc. (NYSE:WGO) is even less popular than BGS. Hedge funds clearly dropped the ball on WGO as the stock delivered strong returns, though hedge funds’ consensus picks still generated respectable returns. 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. A small number of hedge funds were also right about betting on WGO as the stock returned 23.9% during the fourth quarter (through the end of November) and outperformed the market by an even larger margin.

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

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