Coronavirus is probably the #1 concern in investors' minds right now. It should be. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW. We predicted that a US recession is imminent and US stocks will go down by at least 20% in the next 3-6 months. We also told you to short the market ETFs and buy long-term bonds. Investors who agreed with us and replicated these trades are up double digits whereas the market is down double digits. Our article also called for a total international travel ban to prevent the spread of the coronavirus especially from Europe. We were one step ahead of the markets and the president (see why hell is coming).
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. We know that hedge funds generate strong, risk-adjusted returns over the long run, therefore imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, smart money investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn't mean that they don't have occasional colossal losses; they do (like Peltz's recent General Electric losses). However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, as the current round of 13F filings has just ended, let’s examine the smart money sentiment towards World Wrestling Entertainment, Inc. (NYSE:WWE).
Is World Wrestling Entertainment, Inc. (NYSE:WWE) a healthy stock for your portfolio? Money managers are becoming less hopeful. The number of long hedge fund bets retreated by 7 recently. Our calculations also showed that WWE isn't among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of this article for Q3 rankings).
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by more than 41 percentage points since March 2017 (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 35.3% through March 3rd. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
[caption id="attachment_26340" align="aligncenter" width="400"] Ken Griffin of Citadel Investment Group[/caption]
We leave no stone unturned when looking for the next great investment idea. For example we recently identified a stock that trades 25% below the net cash on its balance sheet. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences, and go through short-term trade recommendations like this one. We even check out the recommendations of services with hard to believe track records. Our best call in 2020 was shorting the market when 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 take a gander at the key hedge fund action surrounding World Wrestling Entertainment, Inc. (NYSE:WWE).
How are hedge funds trading World Wrestling Entertainment, Inc. (NYSE:WWE)?
At Q4's end, a total of 30 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -19% from the third quarter of 2019. On the other hand, there were a total of 34 hedge funds with a bullish position in WWE 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.
Among these funds, Samlyn Capital held the most valuable stake in World Wrestling Entertainment, Inc. (NYSE:WWE), which was worth $116.1 million at the end of the third quarter. On the second spot was SRS Investment Management which amassed $115.8 million worth of shares. Citadel Investment Group, Sirios Capital Management, and Adage 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 Cowbird Capital allocated the biggest weight to World Wrestling Entertainment, Inc. (NYSE:WWE), around 10.49% of its 13F portfolio. Sirios Capital Management is also relatively very bullish on the stock, designating 5.33 percent of its 13F equity portfolio to WWE.
Since World Wrestling Entertainment, Inc. (NYSE:WWE) has witnessed declining sentiment from the entirety of the hedge funds we track, logic holds that there is a sect of hedgies that decided to sell off their entire stakes in the third quarter. Intriguingly, Lone Pine Capital dropped the largest stake of the 750 funds tracked by Insider Monkey, totaling an estimated $210.5 million in stock, and Scott Ferguson's Sachem Head Capital was right behind this move, as the fund said goodbye to about $145.9 million worth. These transactions are important to note, as aggregate hedge fund interest was cut by 7 funds in the third quarter.
Let's now take a look at hedge fund activity in other stocks - not necessarily in the same industry as World Wrestling Entertainment, Inc. (NYSE:WWE) but similarly valued. These stocks are Eastgroup Properties Inc (NYSE:EGP), Tech Data Corp (NASDAQ:TECD), Turkcell Iletisim Hizmetleri A.S. (NYSE:TKC), and Mirati Therapeutics, Inc. (NASDAQ:MRTX). All of these stocks' market caps are similar to WWE's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position EGP,10,64618,-2 TECD,34,645025,11 TKC,7,49348,1 MRTX,32,1719243,-3 Average,20.75,619559,1.75 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 20.75 hedge funds with bullish positions and the average amount invested in these stocks was $620 million. That figure was $599 million in WWE's case. Tech Data Corp (NASDAQ:TECD) is the most popular stock in this table. On the other hand Turkcell Iletisim Hizmetleri A.S. (NYSE:TKC) is the least popular one with only 7 bullish hedge fund positions. World Wrestling Entertainment, Inc. (NYSE:WWE) 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 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks lost 17.4% in 2020 through March 25th but beat the market by 5.5 percentage points. Unfortunately WWE wasn't nearly as popular as these 20 stocks and hedge funds that were betting on WWE were disappointed as the stock returned -46.8% during the same time period 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. Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.