The latest 13F reporting period has come and gone, and Insider Monkey have plowed through 821 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 March 31st, a week after the market trough. Now, we are almost done with the second quarter. Investors decided to bet on the economic recovery and a stock market rebound. S&P 500 Index returned almost 20% this quarter. In this article you are going to find out whether hedge funds thoughtWix.Com Ltd (NASDAQ:WIX) was a good investment heading into the second quarter and how the stock traded in comparison to the top hedge fund picks.
Is Wix.Com Ltd (NASDAQ:WIX) undervalued? Prominent investors were reducing their bets on the stock. The number of bullish hedge fund bets decreased by 5 lately. Our calculations also showed that WIX isn't among the 30 most popular stocks among hedge funds (click for Q1 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.
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 58 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. There is a lot of volatility in the markets and this presents amazing investment opportunities from time to time. For example, this trader claims to deliver juiced up returns with one trade a week, so we are checking out his highest conviction idea. A second trader claims to score lucrative profits by utilizing a "weekend trading strategy", so we look into his strategy's picks. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We recently recommended several stocks partly inspired by legendary Bill Miller's investor letter. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 in February after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind we're going to go over the key hedge fund action encompassing Wix.Com Ltd (NASDAQ:WIX).
What have hedge funds been doing with Wix.Com Ltd (NASDAQ:WIX)?
At the end of the first quarter, a total of 29 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -15% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in WIX over the last 18 quarters. So, let's see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Steadfast Capital Management held the most valuable stake in Wix.Com Ltd (NASDAQ:WIX), which was worth $182.7 million at the end of the third quarter. On the second spot was Renaissance Technologies which amassed $149.6 million worth of shares. Isomer Partners, SQN Investors, and Praesidium Investment Management Company 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 Isomer Partners allocated the biggest weight to Wix.Com Ltd (NASDAQ:WIX), around 19.8% of its 13F portfolio. Blackcrane Capital is also relatively very bullish on the stock, setting aside 15.64 percent of its 13F equity portfolio to WIX.
Since Wix.Com Ltd (NASDAQ:WIX) has experienced falling interest from the entirety of the hedge funds we track, logic holds that there exists a select few hedgies that elected to cut their entire stakes in the first quarter. Intriguingly, Daniel Patrick Gibson's Sylebra Capital Management cut the largest stake of all the hedgies monitored by Insider Monkey, valued at close to $110.5 million in stock. David Gallo's fund, Valinor Management LLC, also said goodbye to its stock, about $72.3 million worth. These moves are interesting, as total hedge fund interest fell by 5 funds in the first quarter.
Let's now take a look at hedge fund activity in other stocks - not necessarily in the same industry as Wix.Com Ltd (NASDAQ:WIX) but similarly valued. We will take a look at Lincoln National Corporation (NYSE:LNC), Lamar Advertising Company (NASDAQ:LAMR), ON Semiconductor Corporation (NASDAQ:ON), and Aegon N.V. (NYSE:AEG). This group of stocks' market valuations resemble WIX's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position LNC,26,602265,-14 LAMR,34,217189,6 ON,29,153091,-3 AEG,4,16681,-2 Average,23.25,247307,-3.25 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 23.25 hedge funds with bullish positions and the average amount invested in these stocks was $247 million. That figure was $597 million in WIX's case. Lamar Advertising Company (NASDAQ:LAMR) is the most popular stock in this table. On the other hand Aegon N.V. (NYSE:AEG) is the least popular one with only 4 bullish hedge fund positions. Wix.Com Ltd (NASDAQ:WIX) is not the most popular stock in this group but hedge fund interest is still above average. 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 12.3% in 2020 through June 30th but still beat the market by 15.5 percentage points. Hedge funds were also right about betting on WIX as the stock returned 154.1% in Q2 and outperformed the market. Hedge funds were rewarded for their relative bullishness.
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Disclosure: None. This article was originally published at Insider Monkey.