WMS Industries Inc. (WMS): Hedge Funds and Insiders Are Bearish, What Should You Do?

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WMS Industries Inc. (NYSE:WMS) was in 7 hedge funds’ portfolio at the end of the fourth quarter of 2012. WMS has experienced a decrease in support from the world’s most elite money managers lately. There were 10 hedge funds in our database with WMS positions at the end of the previous quarter.


If you’d ask most shareholders, hedge funds are perceived as worthless, outdated financial tools of the past. While there are more than 8000 funds trading at the moment, we choose to focus on the leaders of this group, around 450 funds. It is estimated that this group has its hands on most of all hedge funds’ total capital, and by keeping an eye on their best equity investments, we have uncovered a number of investment strategies that have historically outperformed the S&P 500 index. Our small-cap hedge fund strategy outpaced the S&P 500 index by 18 percentage points per annum for a decade in our back tests, and since we’ve began to sharing our picks with our subscribers at the end of August 2012, we have outperformed the S&P 500 index by 24 percentage points in 7 months (see all of our picks from August).

Equally as beneficial, positive insider trading sentiment is another way to parse down the marketplace. Just as you’d expect, there are a variety of motivations for an upper level exec to drop shares of his or her company, but only one, very obvious reason why they would initiate a purchase. Various academic studies have demonstrated the market-beating potential of this method if shareholders understand where to look (learn more here).

Now, it’s important to take a peek at the recent action encompassing WMS Industries Inc. (NYSE:WMS).

Hedge fund activity in WMS Industries Inc. (NYSE:WMS)

At year’s end, a total of 7 of the hedge funds we track were bullish in this stock, a change of -30% from one quarter earlier. With hedge funds’ positions undergoing their usual ebb and flow, there exists a select group of notable hedge fund managers who were boosting their holdings substantially.

According to our comprehensive database, John W. Rogers’s Ariel Investments had the most valuable position in WMS Industries Inc. (NYSE:WMS), worth close to $75.2 million, comprising 1.6% of its total 13F portfolio. On Ariel Investments’s heels is Ken Grossman and Glen Schneider of SG Capital Management, with a $13.5 million position; 7.1% of its 13F portfolio is allocated to the company. Some other hedge funds that hold long positions include Israel Englander’s Millennium Management, Ken Griffin’s Citadel Investment Group and Chuck Royce’s Royce & Associates.

Since WMS Industries Inc. (NYSE:WMS) has faced bearish sentiment from hedge fund managers, we can see that there was a specific group of funds that decided to sell off their positions entirely last quarter. Intriguingly, Alexander Mitchell’s Scopus Asset Management cut the biggest investment of all the hedgies we watch, worth an estimated $3.3 million in call options. Dmitry Balyasny’s fund, Balyasny Asset Management, also sold off its call options., about $1.7 million worth. These moves are interesting, as total hedge fund interest was cut by 3 funds last quarter.

What have insiders been doing with WMS Industries Inc. (NYSE:WMS)?

Insider buying is most useful when the primary stock in question has experienced transactions within the past 180 days. Over the last six-month time period, WMS Industries Inc. (NYSE:WMS) has experienced zero unique insiders purchasing, and zero insider sales (see the details of insider trades here).

Let’s check out hedge fund and insider activity in other stocks similar to WMS Industries Inc. (NYSE:WMS). These stocks are Asia Entertainment & Resources Ltd. (NASDAQ:AERL), Multimedia Games Holding Company Inc (NASDAQ:MGAM), Scientific Games Corp (NASDAQ:SGMS), Bally Technologies Inc. (NYSE:BYI), and Churchill Downs, Inc. (NASDAQ:CHDN). All of these stocks are in the gaming activities industry and their market caps match WMS’s market cap.

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