At the end of February we announced the arrival of the first US recession since 2009 and we predicted that the market will decline by at least 20% in (see why hell is coming). We reversed our stance on March 25th after seeing unprecedented fiscal and monetary stimulus unleashed by the Fed and the Congress. This is the perfect market for stock pickers, now that the stocks are fully valued again. In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. In this article, we will take a closer look at hedge fund sentiment towards WW International, Inc. (NASDAQ:WW) at the end of the second quarter and determine whether the smart money was really smart about this stock.
Is WW International, Inc. (NASDAQ:WW) a buy, sell, or hold? Investors who are in the know were in an optimistic mood. The number of long hedge fund bets improved by 4 in recent months. WW International, Inc. (NASDAQ:WW) was in 26 hedge funds' portfolios at the end of June. The all time high for this statistics is 37. Our calculations also showed that WW 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). There were 22 hedge funds in our database with WW positions at the end of the first quarter. Video: Watch our video about the top 5 most popular hedge fund stocks.
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Peter Rathjens of Arrowstreet Capital
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How have hedgies been trading WW International, Inc. (NASDAQ:WW)?
Heading into the third quarter of 2020, a total of 26 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 18% from one quarter earlier. By comparison, 21 hedge funds held shares or bullish call options in WW a year ago. So, let's check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Sessa Capital was the largest shareholder of WW International, Inc. (NASDAQ:WW), with a stake worth $64.6 million reported as of the end of September. Trailing Sessa Capital was Stadium Capital Management, which amassed a stake valued at $60.5 million. ThornTree Capital Partners, Arrowstreet Capital, and Two Sigma Advisors 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 Stadium Capital Management allocated the biggest weight to WW International, Inc. (NASDAQ:WW), around 24.25% of its 13F portfolio. Sessa Capital is also relatively very bullish on the stock, earmarking 6.49 percent of its 13F equity portfolio to WW.
As aggregate interest increased, key hedge funds were breaking ground themselves. Arrowstreet Capital, managed by Peter Rathjens, Bruce Clarke and John Campbell, assembled the most valuable position in WW International, Inc. (NASDAQ:WW). Arrowstreet Capital had $30.7 million invested in the company at the end of the quarter. Michael A. Price and Amos Meron's Empyrean Capital Partners also made a $10.5 million investment in the stock during the quarter. The following funds were also among the new WW investors: Michael Gelband's ExodusPoint Capital, Sean Murphy's Game Creek Capital, and Greg Eisner's Engineers Gate Manager.
Let's go over hedge fund activity in other stocks similar to WW International, Inc. (NASDAQ:WW). These stocks are CareDx, Inc. (NASDAQ:CDNA), Sanmina Corporation (NASDAQ:SANM), Intra-Cellular Therapies Inc (NASDAQ:ITCI), Northwest Natural Holding Company (NYSE:NWN), Fulton Financial Corp (NASDAQ:FULT), Xperi Holding Corporation (NASDAQ:XPER), and Glaukos Corporation (NYSE:GKOS). This group of stocks' market caps are closest to WW's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position CDNA,23,257926,6 SANM,20,144125,5 ITCI,13,112591,-6 NWN,14,29553,-3 FULT,15,46005,1 XPER,22,143622,2 GKOS,18,184439,3 Average,17.9,131180,1.1 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 17.9 hedge funds with bullish positions and the average amount invested in these stocks was $131 million. That figure was $285 million in WW's case. CareDx, Inc. (NASDAQ:CDNA) is the most popular stock in this table. On the other hand Intra-Cellular Therapies Inc (NASDAQ:ITCI) is the least popular one with only 13 bullish hedge fund positions. Compared to these stocks WW International, Inc. (NASDAQ:WW) is more popular among hedge funds. Our overall hedge fund sentiment score for WW is 80.1. 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 21.3% in 2020 through September 25th and still beat the market by 17.7 percentage points. Unfortunately WW wasn't nearly as popular as these 10 stocks and hedge funds that were betting on WW were disappointed as the stock returned -28.6% 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.