Many investors, including Paul Tudor Jones or Stan Druckenmiller, have been saying before last year's Q4 market crash that the stock market is overvalued due to a low interest rate environment that leads to companies swapping their equity for debt and focusing mostly on short-term performance such as beating the quarterly earnings estimates. In the first half of 2019, most investors recovered all of their Q4 losses as sentiment shifted and optimism dominated the US China trade negotiations. Nevertheless, many of the stocks that delivered strong returns in the first half still sport strong fundamentals and their gains were more related to the general market sentiment rather than their individual performance and hedge funds kept their bullish stance. In this article we will find out how hedge fund sentiment to Wix.Com Ltd (NASDAQ:WIX) changed recently.
Wix.Com Ltd (NASDAQ:WIX) was in 31 hedge funds' portfolios at the end of the third quarter of 2019. WIX investors should be aware of an increase in activity from the world's largest hedge funds in recent months. There were 26 hedge funds in our database with WIX positions at the end of the previous quarter. Our calculations also showed that WIX isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video at the end of this article for Q2 rankings).
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that hedge funds' large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the Russell 2000 ETFs by 40 percentage points since May 2014 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that'll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 27.8% through November 21, 2019. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
[caption id="attachment_26388" align="aligncenter" width="468"] Lee Ainslie of Maverick Capital[/caption]
We leave no stone unturned when looking for the next great investment idea. For example Discover is offering this insane cashback card, so we look into shorting the stock. One of the most bullish analysts in America just put his money where his mouth is. He says, "I'm investing more today than I did back in early 2009." So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We even check out this option genius' weekly trade ideas. This December, we recommended Adams Energy as a one-way bet based on an under-the-radar fund manager's investor letter and the stock already gained 20 percent. With all of this in mind let's review the fresh hedge fund action surrounding Wix.Com Ltd (NASDAQ:WIX).
How are hedge funds trading Wix.Com Ltd (NASDAQ:WIX)?
At the end of the third quarter, a total of 31 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 19% from the second quarter of 2019. On the other hand, there were a total of 24 hedge funds with a bullish position in WIX a year ago. So, let's see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Renaissance Technologies was the largest shareholder of Wix.Com Ltd (NASDAQ:WIX), with a stake worth $204 million reported as of the end of September. Trailing Renaissance Technologies was Steadfast Capital Management, which amassed a stake valued at $171.2 million. Soroban Capital Partners, SQN Investors, and Sylebra Capital Management 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 18.85% of its 13F portfolio. SQN Investors is also relatively very bullish on the stock, dishing out 10.12 percent of its 13F equity portfolio to WIX.
As industrywide interest jumped, key money managers were breaking ground themselves. Hudson Bay Capital Management, managed by Sander Gerber, initiated the most outsized position in Wix.Com Ltd (NASDAQ:WIX). Hudson Bay Capital Management had $8.2 million invested in the company at the end of the quarter. Lee Ainslie's Maverick Capital also made a $5.7 million investment in the stock during the quarter. The other funds with brand new WIX positions are Matthew Hulsizer's PEAK6 Capital Management, Michael Platt and William Reeves's BlueCrest Capital Mgmt., and Alec Litowitz and Ross Laser's Magnetar Capital.
Let's go over 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 Versum Materials, Inc. (NYSE:VSM), Gardner Denver Holdings, Inc. (NYSE:GDI), SYNNEX Corporation (NYSE:SNX), and AGCO Corporation (NYSE:AGCO). This group of stocks' market caps are similar to WIX's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position VSM,31,1007124,-5 GDI,15,379484,-9 SNX,21,225461,3 AGCO,24,243089,-1 Average,22.75,463790,-3 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 22.75 hedge funds with bullish positions and the average amount invested in these stocks was $464 million. That figure was $987 million in WIX's case. Versum Materials, Inc. (NYSE:VSM) is the most popular stock in this table. On the other hand Gardner Denver Holdings, Inc. (NYSE:GDI) is the least popular one with only 15 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. This is a slightly positive signal but we'd rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.1% in 2019 through December 23rd and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. Unfortunately WIX wasn't nearly as popular as these 20 stocks and hedge funds that were betting on WIX were disappointed as the stock returned 29.2% in 2019 (through December 23rd) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year. Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.