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Is WD-40 Company (NASDAQ:WDFC) a good equity to bet on right now? We like to check what the smart money thinks first before doing extensive research on a given stock. Although there have been several high profile failed hedge fund picks, the consensus picks among hedge fund investors have historically outperformed the market after adjusting for known risk attributes. It's not surprising given that hedge funds have access to better information and more resources to predict the winners in the stock market.
WD-40 Company (NASDAQ:WDFC) shareholders have witnessed an increase in hedge fund sentiment lately. WDFC was in 17 hedge funds' portfolios at the end of the third quarter of 2019. There were 15 hedge funds in our database with WDFC holdings at the end of the previous quarter. Our calculations also showed that WDFC isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings).
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
In the eyes of most shareholders, hedge funds are seen as slow, old investment tools of years past. While there are over 8000 funds trading today, Our experts hone in on the crème de la crème of this club, about 750 funds. It is estimated that this group of investors handle bulk of the smart money's total capital, and by keeping track of their inimitable stock picks, Insider Monkey has determined a few investment strategies that have historically defeated the broader indices. Insider Monkey's flagship short hedge fund strategy surpassed the S&P 500 short ETFs by around 20 percentage points annually since its inception in May 2014. Our portfolio of short stocks lost 27.8% since February 2017 (through November 21st) even though the market was up more than 39% during the same period. We just shared a list of 7 short targets in our latest quarterly update .
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Jim Simons of Renaissance Technologies[/caption]
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. 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 also rely on the best performing hedge funds' buy/sell signals. Let's take a look at the key hedge fund action regarding WD-40 Company (NASDAQ:WDFC).
Hedge fund activity in WD-40 Company (NASDAQ:WDFC)
Heading into the fourth quarter of 2019, a total of 17 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 13% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in WDFC over the last 17 quarters. With hedge funds' sentiment swirling, there exists an "upper tier" of notable hedge fund managers who were increasing their stakes significantly (or already accumulated large positions).
More specifically, Renaissance Technologies was the largest shareholder of WD-40 Company (NASDAQ:WDFC), with a stake worth $71.8 million reported as of the end of September. Trailing Renaissance Technologies was VGI Partners, which amassed a stake valued at $66.9 million. GLG Partners, GAMCO Investors, and D E Shaw 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 VGI Partners allocated the biggest weight to WD-40 Company (NASDAQ:WDFC), around 5.73% of its 13F portfolio. Lyon Street Capital is also relatively very bullish on the stock, earmarking 2.7 percent of its 13F equity portfolio to WDFC.
With a general bullishness amongst the heavyweights, specific money managers have been driving this bullishness. Lyon Street Capital, managed by Brian C. Freckmann, initiated the most outsized position in WD-40 Company (NASDAQ:WDFC). Lyon Street Capital had $1.5 million invested in the company at the end of the quarter. Mike Vranos's Ellington also initiated a $0.5 million position during the quarter. The only other fund with a brand new WDFC position is Steve Cohen's Point72 Asset Management.
Let's now take a look at hedge fund activity in other stocks similar to WD-40 Company (NASDAQ:WDFC). These stocks are Trinity Industries, Inc. (NYSE:TRN), BridgeBio Pharma, Inc. (NASDAQ:BBIO), PolyOne Corporation (NYSE:POL), and Kosmos Energy Ltd (NYSE:KOS). This group of stocks' market valuations match WDFC's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position TRN,26,680181,3 BBIO,12,884584,-2 POL,19,176335,-5 KOS,24,154461,0 Average,20.25,473890,-1 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 20.25 hedge funds with bullish positions and the average amount invested in these stocks was $474 million. That figure was $209 million in WDFC's case. Trinity Industries, Inc. (NYSE:TRN) is the most popular stock in this table. On the other hand BridgeBio Pharma, Inc. (NASDAQ:BBIO) is the least popular one with only 12 bullish hedge fund positions. WD-40 Company (NASDAQ:WDFC) 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 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately WDFC wasn't nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); WDFC investors were disappointed as the stock returned 5.6% during the first two months of the fourth 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 70 percent of these stocks already outperformed the market in Q4.
Disclosure: None. This article was originally published at Insider Monkey.