Does Westwood Holdings Group, Inc. (NYSE:WHG) represent a good buying opportunity at the moment? Let’s quickly check the hedge fund interest towards the company. Hedge fund firms constantly search out bright intellectuals and highly-experienced employees and throw away millions of dollars on satellite photos and other research activities, so it is no wonder why they tend to generate millions in profits each year. It is also true that some hedge fund players fail inconceivably on some occasions, but net net their stock picks have been generating superior risk-adjusted returns on average over the years.
Westwood Holdings Group, Inc. (NYSE:WHG) investors should pay attention to an increase in support from the world's most elite money managers in recent months. Our calculations also showed that WHG isn't among the 30 most popular stocks among hedge funds.
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' small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still 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 underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.
[caption id="attachment_375529" align="aligncenter" width="450"] Mario Gabelli of GAMCO Investors[/caption]
We're going to view the new hedge fund action surrounding Westwood Holdings Group, Inc. (NYSE:WHG).
Hedge fund activity in Westwood Holdings Group, Inc. (NYSE:WHG)
At the end of the first quarter, a total of 11 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 22% from the fourth quarter of 2018. By comparison, 8 hedge funds held shares or bullish call options in WHG a year ago. So, let's examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Westwood Holdings Group, Inc. (NYSE:WHG) was held by Renaissance Technologies, which reported holding $20 million worth of stock at the end of March. It was followed by GAMCO Investors with a $19.9 million position. Other investors bullish on the company included Royce & Associates, Two Sigma Advisors, and Millennium Management.
As industrywide interest jumped, key money managers were leading the bulls' herd. Arrowstreet Capital, managed by Peter Rathjens, Bruce Clarke and John Campbell, established the most outsized position in Westwood Holdings Group, Inc. (NYSE:WHG). Arrowstreet Capital had $0.2 million invested in the company at the end of the quarter. Gavin Saitowitz and Cisco J. del Valle's Springbok Capital also initiated a $0 million position during the quarter.
Let's check out hedge fund activity in other stocks - not necessarily in the same industry as Westwood Holdings Group, Inc. (NYSE:WHG) but similarly valued. We will take a look at DSP Group, Inc. (NASDAQ:DSPG), Park Electrochemical Corp. (NYSE:PKE), Aduro BioTech Inc (NASDAQ:ADRO), and North American Construction Group Ltd. (NYSE:NOA). This group of stocks' market valuations resemble WHG's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position DSPG,13,78336,0 PKE,10,71997,1 ADRO,12,22456,5 NOA,8,51097,0 Average,10.75,55972,1.5 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 10.75 hedge funds with bullish positions and the average amount invested in these stocks was $56 million. That figure was $52 million in WHG's case. DSP Group, Inc. (NASDAQ:DSPG) is the most popular stock in this table. On the other hand North American Construction Group Ltd. (NYSE:NOA) is the least popular one with only 8 bullish hedge fund positions. Westwood Holdings Group, Inc. (NYSE:WHG) 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 6.2% in Q2 through June 19th and outperformed the S&P 500 ETF (SPY) by nearly 3 percentage points. Unfortunately WHG wasn't nearly as popular as these 20 stocks and hedge funds that were betting on WHG were disappointed as the stock returned -14% during the same period 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 13 of these stocks already outperformed the market so far in Q2.
Disclosure: None. This article was originally published at Insider Monkey.