The fourth quarter was a rough one for most investors, as fears of a rising interest rate environment in the U.S, a trade war with China, and a more or less stagnant Europe, weighed heavily on the minds of investors. Both the S&P 500 and Russell 2000 sank as a result, with the Russell 2000, which is composed of smaller companies, being hit especially hard. This was primarily due to hedge funds, which are big supporters of small-cap stocks, pulling some of their capital out of the volatile markets during this time. Let's look at how this market volatility affected the sentiment of hedge funds towards WD-40 Company (NASDAQ:WDFC), and what that likely means for the prospects of the company and its stock.
WD-40 Company (NASDAQ:WDFC) shareholders have witnessed an increase in hedge fund sentiment of late. WDFC was in 15 hedge funds' portfolios at the end of December. There were 10 hedge funds in our database with WDFC holdings at the end of the previous quarter. Our calculations also showed that wdfc isn't among the 30 most popular stocks among hedge funds.
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' 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 market by 32 percentage points since May 2014 through March 12, 2019 (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 27.5% through March 12, 2019. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Let's review the fresh hedge fund action encompassing WD-40 Company (NASDAQ:WDFC).
How are hedge funds trading WD-40 Company (NASDAQ:WDFC)?
Heading into the first quarter of 2019, a total of 15 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 50% from one quarter earlier. On the other hand, there were a total of 6 hedge funds with a bullish position in WDFC a year ago. So, let's review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in WD-40 Company (NASDAQ:WDFC) was held by Renaissance Technologies, which reported holding $106 million worth of stock at the end of September. It was followed by GLG Partners with a $26.7 million position. Other investors bullish on the company included Arrowstreet Capital, GAMCO Investors, and Citadel Investment Group.
As aggregate interest increased, key money managers were breaking ground themselves. D E Shaw, managed by D. E. Shaw, created the most outsized position in WD-40 Company (NASDAQ:WDFC). D E Shaw had $2.2 million invested in the company at the end of the quarter. Israel Englander's Millennium Management also initiated a $1.6 million position during the quarter. The following funds were also among the new WDFC investors: Matthew Hulsizer's PEAK6 Capital Management, Steve Cohen's Point72 Asset Management, and Brandon Haley's Holocene Advisors.
Let's now take a look at hedge fund activity in other stocks - not necessarily in the same industry as WD-40 Company (NASDAQ:WDFC) but similarly valued. These stocks are Finisar Corporation (NASDAQ:FNSR), Resideo Technologies, Inc. (NYSE:REZI), Outfront Media Inc (NYSE:OUT), and Balchem Corporation (NASDAQ:BCPC). This group of stocks' market valuations match WDFC's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position FNSR,13,322901,0 REZI,35,414766,35 OUT,17,234362,4 BCPC,11,57081,3 Average,19,257278,10.5 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 19 hedge funds with bullish positions and the average amount invested in these stocks was $257 million. That figure was $170 million in WDFC's case. Resideo Technologies, Inc. (NYSE:REZI) is the most popular stock in this table. On the other hand Balchem Corporation (NASDAQ:BCPC) is the least popular one with only 11 bullish hedge fund positions. WD-40 Company (NASDAQ:WDFC) 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 15 most popular stocks) among hedge funds returned 24.2% through April 22nd and outperformed the S&P 500 ETF (SPY) by more than 7 percentage points. Unfortunately WDFC wasn't nearly as popular as these 15 stock (hedge fund sentiment was quite bearish); WDFC investors were disappointed as the stock returned -10% and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 15 most popular stocks) among hedge funds as 13 of these stocks already outperformed the market this year.
Disclosure: None. This article was originally published at Insider Monkey.