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Did Hedge Funds Drop The Ball On WillScot Corporation (WSC) ?

Asma UL Husna

After several tireless days we have finished crunching the numbers from nearly 750 13F filings issued by the elite hedge funds and other investment firms that we track at Insider Monkey, which disclosed those firms' equity portfolios as of March 31. The results of that effort will be put on display in this article, as we share valuable insight into the smart money sentiment towards WillScot Corporation (NASDAQ:WSC).

Is WillScot Corporation (NASDAQ:WSC) the right pick for your portfolio? The best stock pickers are taking a pessimistic view. The number of bullish hedge fund positions were trimmed by 2 lately. Our calculations also showed that WSC isn't among the 30 most popular stocks among hedge funds.

So, why do we pay attention to hedge fund sentiment before making any investment decisions? 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 market by 40 percentage points since May 2014 through May 30, 2019 (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. Even if you aren't comfortable with shorting stocks, you should at least avoid initiating long positions in our short portfolio.

Jay Petschek - Corsair Capital

Let's review the fresh hedge fund action surrounding WillScot Corporation (NASDAQ:WSC).

How have hedgies been trading WillScot Corporation (NASDAQ:WSC)?

At Q1's end, a total of 22 of the hedge funds tracked by Insider Monkey were long this stock, a change of -8% from the fourth quarter of 2018. By comparison, 26 hedge funds held shares or bullish call options in WSC a year ago. With hedgies' positions undergoing their usual ebb and flow, there exists a few notable hedge fund managers who were increasing their stakes significantly (or already accumulated large positions).

WSC_june2019

When looking at the institutional investors followed by Insider Monkey, Rubric Capital Management, managed by David Rosen, holds the largest position in WillScot Corporation (NASDAQ:WSC). Rubric Capital Management has a $29.7 million position in the stock, comprising 2.8% of its 13F portfolio. On Rubric Capital Management's heels is Corsair Capital Management, managed by Jay Petschek and Steven Major, which holds a $14.1 million position; the fund has 4.3% of its 13F portfolio invested in the stock. Other professional money managers with similar optimism include Anand Parekh's Alyeska Investment Group, Bernard Selz's Selz Capital and Jerome L. Simon's Lonestar Capital Management.

Judging by the fact that WillScot Corporation (NASDAQ:WSC) has experienced falling interest from the smart money, it's easy to see that there lies a certain "tier" of hedge funds that decided to sell off their full holdings last quarter. At the top of the heap, Christopher Pucillo's Solus Alternative Asset Management cut the largest position of all the hedgies watched by Insider Monkey, valued at about $18.3 million in stock. Jeffrey Bersh and Michael Wartell's fund, Venor Capital Management, also said goodbye to its stock, about $13.3 million worth. These moves are intriguing to say the least, as total hedge fund interest fell by 2 funds last quarter.

Let's go over hedge fund activity in other stocks - not necessarily in the same industry as WillScot Corporation (NASDAQ:WSC) but similarly valued. These stocks are Editas Medicine, Inc. (NASDAQ:EDIT), FormFactor, Inc. (NASDAQ:FORM), Kearny Financial Corp. (NASDAQ:KRNY), and Schweitzer-Mauduit International, Inc. (NYSE:SWM). This group of stocks' market caps resemble WSC's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position EDIT,15,107651,-3 FORM,11,51910,1 KRNY,16,150468,1 SWM,10,23959,2 Average,13,83497,0.25 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 13 hedge funds with bullish positions and the average amount invested in these stocks was $83 million. That figure was $132 million in WSC's case. Kearny Financial Corp. (NASDAQ:KRNY) is the most popular stock in this table. On the other hand Schweitzer-Mauduit International, Inc. (NYSE:SWM) is the least popular one with only 10 bullish hedge fund positions. Compared to these stocks WillScot Corporation (NASDAQ:WSC) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 1.9% in Q2 through May 30th and outperformed the S&P 500 ETF (SPY) by more than 3 percentage points. Hedge funds were also right about betting on WSC as the stock returned 25% during the same period and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.

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

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