We hate to say this but, we told you so. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW and predicted a US recession when the S&P 500 Index was trading at the 3150 level. We also told you to short the market and buy long-term Treasury bonds. Our article also called for a total international travel ban. While we were warning you, President Trump minimized the threat and failed to act promptly. As a result of his inaction, we will now experience a deeper recession (10 coronavirus predictions).
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. Insider Monkey has processed numerous 13F filings of hedge funds and successful value investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds' and successful investors' positions as of the end of the fourth quarter. You can find articles about an individual hedge fund's trades on numerous financial news websites. However, in this article we will take a look at their collective moves over the last 4 years and analyze what the smart money thinks of Wix.Com Ltd (NASDAQ:WIX) based on that data.
Is Wix.Com Ltd (NASDAQ:WIX) a splendid stock to buy now? Prominent investors are in an optimistic mood. The number of bullish hedge fund positions moved up by 1 in recent months. Our calculations also showed that WIX isn't among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of this article for Q3 rankings). WIX was in 34 hedge funds' portfolios at the end of the fourth quarter of 2019. There were 33 hedge funds in our database with WIX holdings at the end of the previous quarter.
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 41 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 35.3% through March 3rd. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
[caption id="attachment_26029" align="aligncenter" width="399"] Steve Cohen of Point72 Asset Management[/caption]
We leave no stone unturned when looking for the next great investment idea. For example we recently identified a stock that trades 25% below the net cash on its balance sheet. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences, and go through short-term trade recommendations like this one. We even check out the recommendations of services with hard to believe track records. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic's significance before most investors. Now let's take a gander at the latest hedge fund action surrounding Wix.Com Ltd (NASDAQ:WIX).
What have hedge funds been doing with Wix.Com Ltd (NASDAQ:WIX)?
At the end of the fourth quarter, a total of 34 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 3% from the previous quarter. On the other hand, there were a total of 27 hedge funds with a bullish position in WIX a year ago. With the smart money's positions undergoing their usual ebb and flow, there exists a few noteworthy hedge fund managers who were increasing their holdings considerably (or already accumulated large positions).
Among these funds, Steadfast Capital Management held the most valuable stake in Wix.Com Ltd (NASDAQ:WIX), which was worth $249.6 million at the end of the third quarter. On the second spot was Renaissance Technologies which amassed $192.9 million worth of shares. Sylebra Capital Management, SQN Investors, and Valinor Management LLC 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 Isomer Partners allocated the biggest weight to Wix.Com Ltd (NASDAQ:WIX), around 18.54% of its 13F portfolio. Blackcrane Capital is also relatively very bullish on the stock, setting aside 10.34 percent of its 13F equity portfolio to WIX.
With a general bullishness amongst the heavyweights, key money managers have been driving this bullishness. Bloom Tree Partners, managed by Alok Agrawal, established the most valuable position in Wix.Com Ltd (NASDAQ:WIX). Bloom Tree Partners had $61 million invested in the company at the end of the quarter. Steve Cohen's Point72 Asset Management also made a $52.9 million investment in the stock during the quarter. The other funds with brand new WIX positions are Benjamin A. Smith's Laurion Capital Management, Daniel Kim's Blackcrane Capital, and Carl Anderson's Marcho Partners.
Let's also examine hedge fund activity in other stocks - not necessarily in the same industry as Wix.Com Ltd (NASDAQ:WIX) but similarly valued. We will take a look at CACI International Inc (NYSE:CACI), Tallgrass Energy, LP (NYSE:TGE), Polaris Inc. (NYSE:PII), and Ingredion Inc (NYSE:INGR). This group of stocks' market caps are closest to WIX's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position CACI,24,441472,-2 TGE,31,377431,8 PII,26,353558,-3 INGR,23,304077,-6 Average,26,369135,-0.75 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 26 hedge funds with bullish positions and the average amount invested in these stocks was $369 million. That figure was $1073 million in WIX's case. Tallgrass Energy, LP (NYSE:TGE) is the most popular stock in this table. On the other hand Ingredion Inc (NYSE:INGR) is the least popular one with only 23 bullish hedge fund positions. Compared to these stocks Wix.Com Ltd (NASDAQ:WIX) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks lost 22.3% in 2020 through March 16th and still beat the market by 3.2 percentage points. Unfortunately WIX wasn't nearly as popular as these 20 stocks and hedge funds that were betting on WIX were disappointed as the stock returned -28.1% during the first two and a half months of 2020 (through March 16th) 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 most of these stocks already outperformed the market in Q1. Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.