Concerns over rising interest rates and expected further rate increases have hit several stocks hard during the fourth quarter of 2018. Trends reversed 180 degrees in 2019 amid Powell's pivot and optimistic expectations towards a trade deal with China. Hedge funds and institutional investors tracked by Insider Monkey usually invest a disproportionate amount of their portfolios in smaller cap stocks. We have been receiving indications that hedge funds were increasing their overall exposure in the third quarter and this is one of the factors behind the recent movements in major indices. In this article, we will take a closer look at hedge fund sentiment towards Wix.Com Ltd (NASDAQ:WIX).
Wix.Com Ltd (NASDAQ:WIX) has experienced an increase in hedge fund sentiment recently. WIX was in 31 hedge funds' portfolios at the end of September. There were 26 hedge funds in our database with WIX positions at the end of the previous quarter. Our calculations also showed that WIX 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.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that hedge funds' large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were 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'll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 27.8% through November 21, 2019. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
[caption id="attachment_26388" align="aligncenter" width="468"] Lee Ainslie of Maverick Capital[/caption]
Unlike the largest US hedge funds that are convinced Dow will soar past 40,000 or the world's most bearish hedge fund that's more convinced than ever that a crash is coming, our long-short investment strategy doesn't rely on bull or bear markets to deliver double digit returns. We only rely on the best performing hedge funds' buy/sell signals. We're going to review the latest hedge fund action encompassing Wix.Com Ltd (NASDAQ:WIX).
Hedge fund activity in Wix.Com Ltd (NASDAQ:WIX)
At the end of the third quarter, a total of 31 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 19% from the second quarter of 2019. Below, you can check out the change in hedge fund sentiment towards WIX over the last 17 quarters. So, let's examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Renaissance Technologies was the largest shareholder of Wix.Com Ltd (NASDAQ:WIX), with a stake worth $204 million reported as of the end of September. Trailing Renaissance Technologies was Steadfast Capital Management, which amassed a stake valued at $171.2 million. Soroban Capital Partners, SQN Investors, and Sylebra Capital 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 Isomer Partners allocated the biggest weight to Wix.Com Ltd (NASDAQ:WIX), around 18.85% of its portfolio. SQN Investors is also relatively very bullish on the stock, designating 10.12 percent of its 13F equity portfolio to WIX.
Now, key money managers have been driving this bullishness. Hudson Bay Capital Management, managed by Sander Gerber, assembled the biggest position in Wix.Com Ltd (NASDAQ:WIX). Hudson Bay Capital Management had $8.2 million invested in the company at the end of the quarter. Lee Ainslie's Maverick Capital also initiated a $5.7 million position during the quarter. The other funds with new positions in the stock are Matthew Hulsizer's PEAK6 Capital Management, Michael Platt and William Reeves's BlueCrest Capital Mgmt., and Alec Litowitz and Ross Laser's Magnetar Capital.
Let's now take a look at hedge fund activity in other stocks similar to Wix.Com Ltd (NASDAQ:WIX). We will take a look at Versum Materials, Inc. (NYSE:VSM), Gardner Denver Holdings, Inc. (NYSE:GDI), SYNNEX Corporation (NYSE:SNX), and AGCO Corporation (NYSE:AGCO). This group of stocks' market values match WIX's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position VSM,31,1007124,-5 GDI,15,379484,-9 SNX,21,225461,3 AGCO,24,243089,-1 Average,22.75,463790,-3 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 22.75 hedge funds with bullish positions and the average amount invested in these stocks was $464 million. That figure was $987 million in WIX's case. Versum Materials, Inc. (NYSE:VSM) is the most popular stock in this table. On the other hand Gardner Denver Holdings, Inc. (NYSE:GDI) is the least popular one with only 15 bullish hedge fund positions. Wix.Com Ltd (NASDAQ:WIX) 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 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 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 3.6% during the fourth quarter (through the end of November) 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 this year.
Disclosure: None. This article was originally published at Insider Monkey.