The first quarter was a breeze as Powell pivoted, and China seemed eager to reach a deal with Trump. Both the S&P 500 and Russell 2000 delivered very strong gains as a result, with the Russell 2000, which is composed of smaller companies, outperforming the large-cap stocks slightly during the first quarter. Unfortunately sentiment shifted in May and August as this time China pivoted and Trump put more pressure on China by increasing tariffs. Hedge funds' top 20 stock picks performed spectacularly in this volatile environment. These stocks delivered a total gain of 24.4% through September 30th, vs. a gain of 20.4% for the S&P 500 ETF. In this article we will look at how this market volatility affected the sentiment of hedge funds towards WNS (Holdings) Limited (NYSE:WNS), and what that likely means for the prospects of the company and its stock.
Is WNS (Holdings) Limited (NYSE:WNS) a first-rate investment now? Investors who are in the know are turning bullish. The number of long hedge fund bets improved by 1 lately. Our calculations also showed that WNS isn't among the 30 most popular stocks among hedge funds (view video below). Video: Click the image to 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' 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 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'll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 25.7% through September 30, 2019. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Unlike former hedge manager, Dr. Steve Sjuggerud, who is convinced Dow will soar past 40000, our long-short investment strategy doesn't rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. We're going to take a gander at the new hedge fund action regarding WNS (Holdings) Limited (NYSE:WNS).
What have hedge funds been doing with WNS (Holdings) Limited (NYSE:WNS)?
At Q2's end, a total of 16 of the hedge funds tracked by Insider Monkey were long this stock, a change of 7% from the first quarter of 2019. The graph below displays the number of hedge funds with bullish position in WNS over the last 16 quarters. With hedge funds' capital changing hands, there exists a select group of key hedge fund managers who were adding to their holdings significantly (or already accumulated large positions).
According to Insider Monkey's hedge fund database, Renaissance Technologies has the number one position in WNS (Holdings) Limited (NYSE:WNS), worth close to $74.3 million, amounting to 0.1% of its total 13F portfolio. Sitting at the No. 2 spot is Arrowstreet Capital, led by Peter Rathjens, Bruce Clarke and John Campbell, holding a $22.6 million position; 0.1% of its 13F portfolio is allocated to the stock. Some other members of the smart money that are bullish comprise Noam Gottesman's GLG Partners, Paul Marshall and Ian Wace's Marshall Wace LLP and Ric Dillon's Diamond Hill Capital.
Now, key hedge funds were leading the bulls' herd. Citadel Investment Group, managed by Ken Griffin, established the most outsized position in WNS (Holdings) Limited (NYSE:WNS). Citadel Investment Group had $0.6 million invested in the company at the end of the quarter. Minhua Zhang's Weld Capital Management also made a $0.4 million investment in the stock during the quarter.
Let's also examine hedge fund activity in other stocks similar to WNS (Holdings) Limited (NYSE:WNS). These stocks are NuVasive, Inc. (NASDAQ:NUVA), HMS Holdings Corp. (NASDAQ:HMSY), Houlihan Lokey Inc (NYSE:HLI), and Rattler Midstream LP (NASDAQ:RTLR). This group of stocks' market caps match WNS's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position NUVA,24,267479,4 HMSY,21,186302,-5 HLI,15,124317,1 RTLR,20,217080,20 Average,20,198795,5 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 20 hedge funds with bullish positions and the average amount invested in these stocks was $199 million. That figure was $205 million in WNS's case. NuVasive, Inc. (NASDAQ:NUVA) is the most popular stock in this table. On the other hand Houlihan Lokey Inc (NYSE:HLI) is the least popular one with only 15 bullish hedge fund positions. WNS (Holdings) Limited (NYSE:WNS) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and 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 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Unfortunately WNS wasn't nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); WNS investors were disappointed as the stock returned -0.8% during the third 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 20 most popular stocks among hedge funds as many of these stocks already outperformed the market so far in 2019.
Disclosure: None. This article was originally published at Insider Monkey.
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