There are several ways to beat the market, and investing in small cap stocks has historically been one of them. We like to improve the odds of beating the market further by examining what famous hedge fund operators such as Jeff Ubben, George Soros and Carl Icahn think. Those hedge fund operators make billions of dollars each year by hiring the best and the brightest to do research on stocks, including small cap stocks that big brokerage houses simply don't cover. Because of Carl Icahn and other elite funds' exemplary historical records, we pay attention to their small cap picks. In this article, we use hedge fund filing data to analyze W&T Offshore, Inc. (NYSE:WTI).
W&T Offshore, Inc. (NYSE:WTI) was in 22 hedge funds' portfolios at the end of the second quarter of 2019. WTI has seen a decrease in hedge fund sentiment recently. There were 24 hedge funds in our database with WTI holdings at the end of the previous quarter. Our calculations also showed that WTI isn't among the 30 most popular stocks among hedge funds (see the video below). Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey's flagship best performing hedge funds strategy returned 25.8% year to date (through May 30th) and outperformed the market even though it draws its stock picks among small-cap stocks. This strategy also outperformed the market by 40 percentage points since its inception (see the details here). That's why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
Unlike former hedge manager, Dr. Steve Sjuggerud, who is convinced Dow will soar past 40000, our long-short investment strategy doesn't rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. Let's analyze the new hedge fund action regarding W&T Offshore, Inc. (NYSE:WTI).
How have hedgies been trading W&T Offshore, Inc. (NYSE:WTI)?
Heading into the third quarter of 2019, a total of 22 of the hedge funds tracked by Insider Monkey were long this stock, a change of -8% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards WTI over the last 16 quarters. So, let's review 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 W&T Offshore, Inc. (NYSE:WTI), with a stake worth $39.3 million reported as of the end of March. Trailing Renaissance Technologies was D E Shaw, which amassed a stake valued at $7.1 million. Arrowstreet Capital, AQR Capital Management, and Two Sigma Advisors were also very fond of the stock, giving the stock large weights in their portfolios.
Judging by the fact that W&T Offshore, Inc. (NYSE:WTI) has faced declining sentiment from hedge fund managers, we can see that there was a specific group of hedgies who were dropping their full holdings by the end of the second quarter. Intriguingly, Paul Marshall and Ian Wace's Marshall Wace LLP sold off the biggest position of the 750 funds monitored by Insider Monkey, totaling about $1.4 million in call options, and Matthew Hulsizer's PEAK6 Capital Management was right behind this move, as the fund dumped about $1.3 million worth. These moves are important to note, as aggregate hedge fund interest fell by 2 funds by the end of the second quarter.
Let's go over hedge fund activity in other stocks - not necessarily in the same industry as W&T Offshore, Inc. (NYSE:WTI) but similarly valued. These stocks are IRSA Propiedades Comerciales S.A. (NASDAQ:IRCP), Ingles Markets, Incorporated (NASDAQ:IMKTA), Weidai Ltd. (NYSE:WEI), and Midland States Bancorp, Inc. (NASDAQ:MSBI). This group of stocks' market caps resemble WTI's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position IRCP,4,20368,0 IMKTA,13,45991,2 WEI,1,381,0 MSBI,6,3340,2 Average,6,17520,1 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 6 hedge funds with bullish positions and the average amount invested in these stocks was $18 million. That figure was $69 million in WTI's case. Ingles Markets, Incorporated (NASDAQ:IMKTA) is the most popular stock in this table. On the other hand Weidai Ltd. (NYSE:WEI) is the least popular one with only 1 bullish hedge fund positions. Compared to these stocks W&T Offshore, Inc. (NYSE:WTI) is more popular among hedge funds. 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 WTI wasn't nearly as popular as these 20 stocks and hedge funds that were betting on WTI were disappointed as the stock returned -11.9% 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 in Q3.
Disclosure: None. This article was originally published at Insider Monkey.
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