We are still in an overall bull market and many stocks that smart money investors were piling into surged through the end of November. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained 54% and 51% respectively. Hedge funds' top 3 stock picks returned 41.7% this year and beat the S&P 500 ETFs by 14 percentage points. Investing in index funds guarantees you average returns, not superior returns. We are looking to generate superior returns for our readers. That's why we believe it isn't a waste of time to check out hedge fund sentiment before you invest in a stock like Waitr Holdings Inc. (NASDAQ:WTRH).
Is Waitr Holdings Inc. (NASDAQ:WTRH) a worthy investment right now? Investors who are in the know are getting less optimistic. The number of bullish hedge fund bets shrunk by 7 in recent months. Our calculations also showed that WTRH 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.
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 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_256969" align="aligncenter" width="450"] Christian Leone of Luxor Capital Group[/caption]
We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world's largest cannabis market, so we check out this European marijuana stock pitch. One of the most bullish analysts in America just put his money where his mouth is. He says, "I'm investing more today than I did back in early 2009." So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We also rely on the best performing hedge funds' buy/sell signals. Let's go over the latest hedge fund action regarding Waitr Holdings Inc. (NASDAQ:WTRH).
How have hedgies been trading Waitr Holdings Inc. (NASDAQ:WTRH)?
Heading into the fourth quarter of 2019, a total of 10 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -41% from the second quarter of 2019. The graph below displays the number of hedge funds with bullish position in WTRH over the last 17 quarters. With the smart money's positions undergoing their usual ebb and flow, there exists a select group of notable hedge fund managers who were increasing their holdings substantially (or already accumulated large positions).
Among these funds, Pelham Capital held the most valuable stake in Waitr Holdings Inc. (NASDAQ:WTRH), which was worth $5.6 million at the end of the third quarter. On the second spot was Leucadia National which amassed $5 million worth of shares. Arrowgrass Capital Partners, Luxor Capital Group, and Hound Partners 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 Leucadia National allocated the biggest weight to Waitr Holdings Inc. (NASDAQ:WTRH), around 0.9% of its 13F portfolio. Pelham Capital is also relatively very bullish on the stock, setting aside 0.63 percent of its 13F equity portfolio to WTRH.
Since Waitr Holdings Inc. (NASDAQ:WTRH) has experienced bearish sentiment from the aggregate hedge fund industry, we can see that there were a few hedgies who were dropping their full holdings heading into Q4. Interestingly, Peter S. Park's Park West Asset Management dumped the largest stake of all the hedgies monitored by Insider Monkey, worth close to $28.4 million in stock, and Keith Meister's Corvex Capital was right behind this move, as the fund cut about $14.5 million worth. These transactions are intriguing to say the least, as aggregate hedge fund interest fell by 7 funds heading into Q4.
Let's go over hedge fund activity in other stocks - not necessarily in the same industry as Waitr Holdings Inc. (NASDAQ:WTRH) but similarly valued. We will take a look at Aspen Group Inc. (NASDAQ:ASPU), International Tower Hill Mines Ltd. (NYSE:THM), Carolina Trust BancShares, Inc. (NASDAQ:CART), and Ur-Energy Inc. (NYSE:URG). All of these stocks' market caps are closest to WTRH's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position ASPU,3,7481,-1 THM,4,35155,-1 CART,5,6371,4 URG,1,3204,-2 Average,3.25,13053,0 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 3.25 hedge funds with bullish positions and the average amount invested in these stocks was $13 million. That figure was $15 million in WTRH's case. Carolina Trust BancShares, Inc. (NASDAQ:CART) is the most popular stock in this table. On the other hand Ur-Energy Inc. (NYSE:URG) is the least popular one with only 1 bullish hedge fund positions. Compared to these stocks Waitr Holdings Inc. (NASDAQ:WTRH) is more popular among hedge funds. 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 WTRH wasn't nearly as popular as these 20 stocks and hedge funds that were betting on WTRH were disappointed as the stock returned -70.4% during the first two months of the fourth 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 70 percent of these stocks already outperformed the market in Q4.
Disclosure: None. This article was originally published at Insider Monkey.