Shares of Winnebago Industries, Inc. (NYSE:WGO) skyrocketed by 8.99% yesterday after the company posted stronger-than-expected fiscal 2015 third quarter financial results. The manufacturer of recreation vehicles reported revenues of $266.5 million for the quarter, a 7.6% growth compared to the revenues of $247.7 million achieved in the fiscal third quarter of 2014, and ahead of the estimates of $261 million. Winnebago Industries, Inc. (NYSE:WGO) announced net income of $11.5 million or earnings per share of $0.43, which were marginally higher than the year-over-year EPS of $0.42. Winnebago beat the market’s earnings expectations of $0.41 per share, while reporting higher revenue than the consensus estimate of $261.44 million. While performance was enhanced by improved shipping volume, the average unit price did fall. Another concern is that the company’s Class A motor homes experienced a significant backlog drop, by 28%, while the smaller motor homes of its Class C segment were up by 22% in its place.
Perhaps that’s why the smart money is turning less bullish on Winnebago. The number of bullish hedge fund bets were cut by four in recent months. Winnebago was in 13 hedge funds’ portfolios at the end of the first quarter of 2015,with net investments valued at $77.91 million. There were 17 hedge funds in our database with Winnebago positions at the end of the previous quarter, with aggregate investments standing at $78.41 million.
At Insider Monkey, we track hedge funds’ moves in order to identify actionable patterns and profit from them. Our research has shown that hedge funds’ large-cap stock picks historically delivered a monthly alpha of six basis points, though these stocks underperformed the S&P 500 Total Return Index by an average of seven basis points per month between 1999 and 2012. On the other hand, the 15 most popular small-cap stocks among hedge funds outperformed the S&P 500 Index by an average of 95 basis points per month (read the details here). Since the official launch of our small-cap strategy in August 2012, it has performed just as predicted, returning over 142% and beating the market by more than 84 percentage points. We believe the data is clear: investors will be better off by focusing on small-cap stocks utilizing hedge fund expertise rather than large-cap stocks.
We also track the activity of company insiders, who provide another valuable analytical tool with their own buying and selling activity in their company’s shares, with insider buying being a particularly noteworthy metric. In Winnebago’s case, there hasn’t been any insider activity in the company over the past six months.
Let’s take a look at the key hedge fund action surrounding Winnebago Industries, Inc. (NYSE:WGO).
How are hedge funds trading Winnebago Industries, Inc. (NYSE:WGO)?
At the end of the first quarter, a total of 13 of the hedge funds tracked by Insider Monkey were bullish in this stock, a drop of 24% from the end of the fourth quarter. With hedge funds’ positions undergoing their usual ebb and flow, there exists a select group of notable hedge fund managers who were upping their holdings considerably.
When looking at the hedgies followed by Insider Monkey, Royce & Associates, managed by Chuck Royce, holds the largest position in Winnebago Industries, Inc. (NYSE:WGO). Royce & Associates has a $38.9 million position in the stock, comprising 0.1% of its 13F portfolio. The second largest stake is held by Tontine Asset Management, managed by Jeffrey Gendell, which held a $14.2 million position; 2.2% of its 13F portfolio is allocated to the stock. Other members of the smart money that are bullish consist of Steve Pei’s Gratia Capital, Geoffrey Raynor’s Q Investments (Specter Holdings), and George McCabe’s Portolan Capital Management.
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Due to the fact that Winnebago Industries, Inc. (NYSE:WGO) has faced a decline in interest from hedge fund managers, it’s easy to see that there is a section of money managers that slashed their positions entirely heading into the second quarter. Interestingly, David Keidan’s Buckingham Capital Management said goodbye to the biggest stake of the “upper crust” of funds followed by Insider Monkey, comprising about $10.1 million in stock, while Doug Gordon, Jon Hilsabeck and Don Jabro of Shellback Capital were right behind this move, as the fund managers cut about $9.1 million worth of stock from their portfolio. These transactions are interesting, as total hedge fund interest fell by four funds heading into the second quarter.
Despite the increase in its share price, hedge fund managers have reduced positions in Winnebago Industries, indicating lower sentiment, and we see some unfavorable developments in its sales projections. We would not recommend buying this stock at its current levels.
Disclosure: None
