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Wright Medical (WMGI): Hedge Fund Interest Inching Up

The latest 13F reporting period has come and gone, and Insider Monkey have plowed through 823 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds’ and investors’ portfolio positions as of June 30th, when the S&P 500 Index was trading around the 3100 level. Since the end of March, investors decided to bet on the economic recovery and a stock market rebound. S&P 500 Index returned more than 50% since its bottom. In this article you are going to find out whether hedge funds thought Wright Medical Group N.V. (NASDAQ:WMGI) was a good investment heading into the third quarter and how the stock traded in comparison to the top hedge fund picks.

Wright Medical Group N.V. (NASDAQ:WMGI) investors should be aware of an increase in enthusiasm from smart money of late. Wright Medical Group N.V. (NASDAQ:WMGI) was in 38 hedge funds’ portfolios at the end of June. The all time high for this statistics is 46. Our calculations also showed that WMGI isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings and see the video for a quick look at the top 5 stocks).

Video: Watch our video about the top 5 most popular hedge fund stocks.

To most shareholders, hedge funds are viewed as underperforming, outdated financial tools of years past. While there are over 8000 funds with their doors open today, Our experts look at the crème de la crème of this club, around 850 funds. These hedge fund managers orchestrate most of the smart money’s total asset base, and by watching their finest equity investments, Insider Monkey has discovered several investment strategies that have historically outrun Mr. Market. Insider Monkey’s flagship short hedge fund strategy outpaced the S&P 500 short ETFs by around 20 percentage points a year since its inception in March 2017. Our portfolio of short stocks lost 34% since February 2017 (through August 17th) even though the market was up 53% during the same period. We just shared a list of 8 short targets in our latest quarterly update .

Clint Carlson of Carlson Capital

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 precious metals prices. So, we are checking out this junior gold mining stock. Legal marijuana is one of the fastest growing industries right now, so we are also checking out stock pitches like “the Starbucks of cannabis” to identify the next tenbagger. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We go through lists like the 10 most profitable companies in the world 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. Keeping this in mind we’re going to take a look at the latest hedge fund action regarding Wright Medical Group N.V. (NASDAQ:WMGI).

What does smart money think about Wright Medical Group N.V. (NASDAQ:WMGI)?

At second quarter’s end, a total of 38 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 3% from the first quarter of 2020. Below, you can check out the change in hedge fund sentiment towards WMGI over the last 20 quarters. With the smart money’s capital changing hands, there exists a select group of key hedge fund managers who were increasing their stakes meaningfully (or already accumulated large positions).

Is WMGI A Good Stock To Buy?

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Clint Carlson’s Carlson Capital has the most valuable position in Wright Medical Group N.V. (NASDAQ:WMGI), worth close to $134.7 million, comprising 3.7% of its total 13F portfolio. Sitting at the No. 2 spot is Magnetar Capital, led by Alec Litowitz and Ross Laser, holding a $134.4 million position; 4% of its 13F portfolio is allocated to the stock. Remaining peers with similar optimism comprise John Orrico’s Water Island Capital, Steven Clark’s Omni Partners and Michel Massoud’s Melqart Asset Management. In terms of the portfolio weights assigned to each position Havens Advisors allocated the biggest weight to Wright Medical Group N.V. (NASDAQ:WMGI), around 14.42% of its 13F portfolio. Omni Partners is also relatively very bullish on the stock, setting aside 8.86 percent of its 13F equity portfolio to WMGI.

As one would reasonably expect, specific money managers were breaking ground themselves. Pentwater Capital Management, managed by Matthew Halbower, created the largest position in Wright Medical Group N.V. (NASDAQ:WMGI). Pentwater Capital Management had $11.2 million invested in the company at the end of the quarter. Richard Driehaus’s Driehaus Capital also initiated a $7.9 million position during the quarter. The following funds were also among the new WMGI investors: Donald Sussman’s Paloma Partners, Adam Guren’s Hunting Hill Global Capital, and Michael Hintze’s CQS Cayman LP.

Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Wright Medical Group N.V. (NASDAQ:WMGI) but similarly valued. These stocks are Lattice Semiconductor Corporation (NASDAQ:LSCC), Armstrong World Industries, Inc. (NYSE:AWI), Western Alliance Bancorporation (NYSE:WAL), GW Pharmaceuticals plc (NASDAQ:GWPH), National Fuel Gas Company (NYSE:NFG), Hutchison China MediTech Limited (NASDAQ:HCM), and Southwest Gas Holdings, Inc. (NYSE:SWX). This group of stocks’ market valuations are similar to WMGI’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
LSCC 19 162880 -7
AWI 34 372376 14
WAL 24 139929 -3
GWPH 18 350605 -3
NFG 22 174710 4
HCM 7 34538 1
SWX 13 83518 0
Average 19.6 188365 0.9

View table here if you experience formatting issues.

As you can see these stocks had an average of 19.6 hedge funds with bullish positions and the average amount invested in these stocks was $188 million. That figure was $800 million in WMGI’s case. Armstrong World Industries, Inc. (NYSE:AWI) is the most popular stock in this table. On the other hand Hutchison China MediTech Limited (NASDAQ:HCM) is the least popular one with only 7 bullish hedge fund positions. Compared to these stocks Wright Medical Group N.V. (NASDAQ:WMGI) is more popular among hedge funds. Our overall hedge fund sentiment score for WMGI is 80.8. 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 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 33% in 2020 through the end of August and still beat the market by 23.2 percentage points. Unfortunately WMGI wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on WMGI were disappointed as the stock returned 1.7% since the end of the second quarter and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.

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