U.S. markets closed

Hedge Funds Ditching John Wiley & Sons Inc (JW)

Abigail Fisher

We at Insider Monkey have gone over 821 13F filings that hedge funds and prominent investors are required to file by the SEC The 13F filings show the funds' and investors' portfolio positions as of March 31st, near the height of the coronavirus market crash. In this article, we look at what those funds think of John Wiley & Sons Inc (NYSE:JW) based on that data.

Is John Wiley & Sons Inc (NYSE:JW) a buy right now? Hedge funds are getting less optimistic. The number of long hedge fund positions dropped by 4 lately. Our calculations also showed that JW 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 was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 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'll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 36% through May 18th. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

[caption id="attachment_25981" align="aligncenter" width="396"] Paul Tudor Jones of Tudor Investment Corp[/caption]

TUDOR INVESTMENT CORP

We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world’s largest cannabis market, so we check out this European marijuana stock pitch. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind we're going to check out the recent hedge fund action surrounding John Wiley & Sons Inc (NYSE:JW).

What does smart money think about John Wiley & Sons Inc (NYSE:JW)?

At the end of the first quarter, a total of 17 of the hedge funds tracked by Insider Monkey were long this stock, a change of -19% from the fourth quarter of 2019. The graph below displays the number of hedge funds with bullish position in JW over the last 18 quarters. With hedge funds' sentiment swirling, there exists a select group of noteworthy hedge fund managers who were increasing their holdings significantly (or already accumulated large positions).

More specifically, AQR Capital Management was the largest shareholder of John Wiley & Sons Inc (NYSE:JW), with a stake worth $16 million reported as of the end of September. Trailing AQR Capital Management was Select Equity Group, which amassed a stake valued at $8.4 million. Millennium Management, Clearline Capital, and Citadel Investment Group 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 Clearline Capital allocated the biggest weight to John Wiley & Sons Inc (NYSE:JW), around 3.18% of its 13F portfolio. Select Equity Group is also relatively very bullish on the stock, designating 0.06 percent of its 13F equity portfolio to JW.

Seeing as John Wiley & Sons Inc (NYSE:JW) has witnessed falling interest from hedge fund managers, logic holds that there lies a certain "tier" of money managers who sold off their positions entirely heading into Q4. At the top of the heap, Renaissance Technologies dumped the biggest position of the 750 funds followed by Insider Monkey, comprising close to $6.4 million in stock, and Donald Sussman's Paloma Partners was right behind this move, as the fund dumped about $1.4 million worth. These bearish behaviors are interesting, as aggregate hedge fund interest was cut by 4 funds heading into Q4.

Let's also examine hedge fund activity in other stocks similar to John Wiley & Sons Inc (NYSE:JW). These stocks are Webster Financial Corporation (NYSE:WBS), Energizer Holdings, Inc. (NYSE:ENR), EnerSys (NYSE:ENS), and Arena Pharmaceuticals, Inc. (NASDAQ:ARNA). This group of stocks' market valuations resemble JW's market valuation.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position WBS,33,223111,9 ENR,21,119723,-1 ENS,16,81264,3 ARNA,36,362670,3 Average,26.5,196692,3.5 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 26.5 hedge funds with bullish positions and the average amount invested in these stocks was $197 million. That figure was $55 million in JW's case. Arena Pharmaceuticals, Inc. (NASDAQ:ARNA) is the most popular stock in this table. On the other hand EnerSys (NYSE:ENS) is the least popular one with only 16 bullish hedge fund positions. John Wiley & Sons Inc (NYSE:JW) 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 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 13.4% in 2020 through June 22nd and surpassed the market by 15.9 percentage points. Unfortunately JW wasn't nearly as popular as these 10 stocks (hedge fund sentiment was quite bearish); JW investors were disappointed as the stock returned 5.9% during 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.

[company-follow-email id=107140][/company-follow-email]

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

Related Content