Investing in small cap stocks has historically been a way to outperform the market, as small cap companies typically grow faster on average than the blue chips. That outperformance comes with a price, however, as there are occasional periods of higher volatility. The last 12 months is one of those periods, as the Russell 2000 ETF (IWM) has underperformed the larger S&P 500 ETF (SPY) by more than 10 percentage points. Given that the funds we track tend to have a disproportionate amount of their portfolios in smaller cap stocks, they have seen some volatility in their portfolios too. Actually their moves are potentially one of the factors that contributed to this volatility. In this article, we use our extensive database of hedge fund holdings to find out what the smart money thinks of Westwood Holdings Group, Inc. (NYSE:WHG).
Hedge fund interest in Westwood Holdings Group, Inc. (NYSE:WHG) shares was flat at the end of last quarter. This is usually a negative indicator. At the end of this article we will also compare WHG to other stocks including Exela Technologies, Inc. (NASDAQ:XELA), Oxford Square Capital Corp. (NASDAQ:OXSQ), and The Cato Corporation (NYSE:CATO) to get a better sense of its popularity. Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
To most shareholders, hedge funds are assumed to be slow, outdated financial vehicles of the past. While there are greater than 8000 funds with their doors open today, We choose to focus on the bigwigs of this group, approximately 750 funds. Most estimates calculate that this group of people shepherd the lion's share of all hedge funds' total capital, and by paying attention to their inimitable stock picks, Insider Monkey has unearthed several investment strategies that have historically outperformed the market. Insider Monkey's flagship hedge fund strategy beat the S&P 500 index by around 5 percentage points per annum since its inception in May 2014. We were able to generate large returns even by identifying short candidates. Our portfolio of short stocks lost 25.7% since February 2017 (through September 30th) even though the market was up more than 33% during the same period. We just shared a list of 10 short targets in our latest quarterly update .
In addition to following the biggest hedge funds for investment ideas, we also share stock pitches from conferences, investor letters and other sources like this one where the fund manager is talking about two under the radar 1000% return potential stocks: first one in internet infrastructure and the second in the heart of advertising market. We use hedge fund buy/sell signals to determine whether to conduct in-depth analysis of these stock ideas which take days. Let's take a glance at the recent hedge fund action surrounding Westwood Holdings Group, Inc. (NYSE:WHG).
Hedge fund activity in Westwood Holdings Group, Inc. (NYSE:WHG)
At Q2's end, a total of 11 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 0% from the previous quarter. By comparison, 9 hedge funds held shares or bullish call options in WHG a year ago. With hedge funds' capital changing hands, there exists a few notable hedge fund managers who were upping their holdings considerably (or already accumulated large positions).
More specifically, Renaissance Technologies was the largest shareholder of Westwood Holdings Group, Inc. (NYSE:WHG), with a stake worth $24.5 million reported as of the end of March. Trailing Renaissance Technologies was GAMCO Investors, which amassed a stake valued at $19.8 million. Royce & Associates, AQR Capital Management, and Millennium Management were also very fond of the stock, giving the stock large weights in their portfolios.
Earlier we told you that the aggregate hedge fund interest in the stock was unchanged and we view this as a negative development. Even though there weren't any hedge funds dumping their holdings during the second quarter, there weren't any hedge funds initiating brand new positions. This indicates that hedge funds, at the very best, perceive this stock as dead money and they haven't identified any viable catalysts that can attract investor attention.
Let's also examine 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 Exela Technologies, Inc. (NASDAQ:XELA), Oxford Square Capital Corp. (NASDAQ:OXSQ), The Cato Corporation (NYSE:CATO), and Graf Industrial Corp. (NYSE:GRAF). 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 XELA,9,63939,-1 OXSQ,5,8208,-1 CATO,18,26029,6 GRAF,12,54469,0 Average,11,38161,1 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 11 hedge funds with bullish positions and the average amount invested in these stocks was $38 million. That figure was $58 million in WHG's case. The Cato Corporation (NYSE:CATO) is the most popular stock in this table. On the other hand Oxford Square Capital Corp. (NASDAQ:OXSQ) is the least popular one with only 5 bullish hedge fund positions. Westwood Holdings Group, Inc. (NYSE:WHG) 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 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Unfortunately WHG wasn't nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); WHG investors were disappointed as the stock returned -19.3% during the third 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 many of these stocks already outperformed the market so far in 2019.
Disclosure: None. This article was originally published at Insider Monkey.