Is WNS (Holdings) Limited (NYSE:WNS) a good bet right now? We like to analyze hedge fund sentiment before conducting days of in-depth research. We do so because hedge funds and other elite investors have numerous Ivy League graduates, expert network advisers, and supply chain tipsters working or consulting for them. There is not a shortage of news stories covering failed hedge fund investments and it is a fact that hedge funds' picks don't beat the market 100% of the time, but their consensus picks have historically done very well and have outperformed the market after adjusting for risk.
WNS (Holdings) Limited (NYSE:WNS) has experienced an increase in support from the world's most elite money managers in recent months. WNS was in 18 hedge funds' portfolios at the end of the third quarter of 2019. There were 16 hedge funds in our database with WNS holdings at the end of the previous quarter. Our calculations also showed that WNS 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.
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 Russell 2000 ETFs by 40 percentage points since May 2014 (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_26357" align="aligncenter" width="359"] Ken Fisher of Fisher Asset Management[/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 view the fresh hedge fund action regarding WNS (Holdings) Limited (NYSE:WNS).
How have hedgies been trading WNS (Holdings) Limited (NYSE:WNS)?
At the end of the third quarter, a total of 18 of the hedge funds tracked by Insider Monkey were long this stock, a change of 13% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in WNS over the last 17 quarters. So, let's review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Renaissance Technologies held the most valuable stake in WNS (Holdings) Limited (NYSE:WNS), which was worth $78.1 million at the end of the third quarter. On the second spot was Millennium Management which amassed $23.1 million worth of shares. Arrowstreet Capital, GLG Partners, and Fisher Asset Management 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 Sensato Capital Management allocated the biggest weight to WNS (Holdings) Limited (NYSE:WNS), around 4.55% of its 13F portfolio. Dalton Investments is also relatively very bullish on the stock, designating 1.2 percent of its 13F equity portfolio to WNS.
Now, specific money managers have been driving this bullishness. Stevens Capital Management, managed by Matthew Tewksbury, created the largest position in WNS (Holdings) Limited (NYSE:WNS). Stevens Capital Management had $0.4 million invested in the company at the end of the quarter.
Let's now review hedge fund activity in other stocks similar to WNS (Holdings) Limited (NYSE:WNS). These stocks are RLJ Lodging Trust (NYSE:RLJ), Itron, Inc. (NASDAQ:ITRI), Taro Pharmaceutical Industries Ltd. (NYSE:TARO), and Albany International Corp. (NYSE:AIN). This group of stocks' market values resemble WNS's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position RLJ,19,148775,-2 ITRI,23,435552,1 TARO,10,77317,0 AIN,12,82477,-3 Average,16,186030,-1 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 16 hedge funds with bullish positions and the average amount invested in these stocks was $186 million. That figure was $214 million in WNS's case. Itron, Inc. (NASDAQ:ITRI) is the most popular stock in this table. On the other hand Taro Pharmaceutical Industries Ltd. (NYSE:TARO) is the least popular one with only 10 bullish hedge fund positions. WNS (Holdings) Limited (NYSE:WNS) is not the most popular stock in this group but hedge fund interest is still above average. 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. Hedge funds were also right about betting on WNS, though not to the same extent, as the stock returned 7.4% during the first two months of the fourth quarter and outperformed the market as well.
Disclosure: None. This article was originally published at Insider Monkey.