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Hedge Funds Are Selling Workhorse Group, Inc. (WKHS)

Debasis Saha

In this article we will take a look at whether hedge funds think Workhorse Group, Inc. (NASDAQ:WKHS) is a good investment right now. We check hedge fund and billionaire investor sentiment before delving into hours of research. Hedge funds spend millions of dollars on Ivy League graduates, unconventional data sources, expert networks, and get tips from investment bankers and industry insiders. Sure they sometimes fail miserably, but their consensus stock picks historically outperformed the market after adjusting for known risk factors.

Workhorse Group, Inc. (NASDAQ:WKHS) shareholders have witnessed a decrease in hedge fund sentiment in recent months. Our calculations also showed that WKHS isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks). Video: Watch our video about the top 5 most popular hedge fund stocks.

In the financial world there are a multitude of tools market participants can use to grade stocks. Some of the most innovative tools are hedge fund and insider trading sentiment. Our experts have shown that, historically, those who follow the best picks of the top money managers can outpace the S&P 500 by a very impressive amount (see the details here).

[caption id="attachment_738761" align="aligncenter" width="400"] Fred DiSanto of Ancora Advisors[/caption]

Fred DiSanto Ancora Advisors

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, 2020’s unprecedented market conditions provide us with the highest number of trading opportunities in a decade. So we are checking out stocks recommended/scorned by legendary Bill Miller. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind we're going to analyze the key hedge fund action surrounding Workhorse Group, Inc. (NASDAQ:WKHS).

How are hedge funds trading Workhorse Group, Inc. (NASDAQ:WKHS)?

At the end of the first quarter, a total of 6 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -40% from the previous quarter. The graph below displays the number of hedge funds with bullish position in WKHS over the last 18 quarters. So, let's see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Is WKHS A Good Stock To Buy?

Among these funds, Arosa Capital Management held the most valuable stake in Workhorse Group, Inc. (NASDAQ:WKHS), which was worth $3.7 million at the end of the third quarter. On the second spot was Millennium Management which amassed $1.3 million worth of shares. ExodusPoint Capital, Ancora Advisors, and Birchview Capital 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 Arosa Capital Management allocated the biggest weight to Workhorse Group, Inc. (NASDAQ:WKHS), around 0.44% of its 13F portfolio. Birchview Capital is also relatively very bullish on the stock, setting aside 0.04 percent of its 13F equity portfolio to WKHS.

Judging by the fact that Workhorse Group, Inc. (NASDAQ:WKHS) has witnessed bearish sentiment from hedge fund managers, it's safe to say that there were a few fund managers that decided to sell off their full holdings last quarter. Intriguingly, Benjamin A. Smith's Laurion Capital Management sold off the biggest position of the "upper crust" of funds watched by Insider Monkey, worth close to $0.6 million in stock, and Gavin Saitowitz and Cisco J. del Valle's Springbok Capital was right behind this move, as the fund said goodbye to about $0.3 million worth. These transactions are important to note, as aggregate hedge fund interest fell by 4 funds last quarter.

Let's now review hedge fund activity in other stocks similar to Workhorse Group, Inc. (NASDAQ:WKHS). These stocks are Westport Innovations Inc. (NASDAQ:WPRT), Alta Equipment Group Inc. (NYSE:ALTG), PC Tel Inc (NASDAQ:PCTI), and RTI Surgical Inc. (NASDAQ:RTIX). This group of stocks' market caps match WKHS's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position WPRT,13,12752,0 ALTG,20,23486,10 PCTI,11,22662,-7 RTIX,10,11461,-3 Average,13.5,17590,0 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 13.5 hedge funds with bullish positions and the average amount invested in these stocks was $18 million. That figure was $6 million in WKHS's case. Alta Equipment Group Inc. (NYSE:ALTG) is the most popular stock in this table. On the other hand RTI Surgical Inc. (NASDAQ:RTIX) is the least popular one with only 10 bullish hedge fund positions. Compared to these stocks Workhorse Group, Inc. (NASDAQ:WKHS) is even less popular than RTIX. Hedge funds clearly dropped the ball on WKHS as the stock delivered strong returns, though hedge funds' consensus picks still generated respectable returns. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 13.9% in 2020 through June 10th and still beat the market by 14.2 percentage points. A small number of hedge funds were also right about betting on WKHS as the stock returned 123.8% so far in the second quarter and outperformed the market by an even larger margin.

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Disclosure: None. This article was originally published at Insider Monkey.

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