"Since 2006, value stocks (IVE vs IVW) have underperformed 11 of the 13 calendar years and when they beat growth, it wasn't by much. Cumulatively, through this week, it has been a 122% differential (up 52% for value vs up 174% for growth). This appears to be the longest and most severe drought for value investors since data collection began. It will go our way eventually as there are too many people paying far too much for today's darlings, both public and private. Further, the ten-year yield of 2.5% (pre-tax) isn't attractive nor is real estate. We believe the value part of the global equity market is the only place to earn solid risk adjusted returns and we believe those returns will be higher than normal," said Vilas Fund in its Q1 investor letter. We aren't sure whether value stocks outperform growth, but we follow hedge fund investor letters to understand where the markets and stocks might be going. This article will lay out and discuss the hedge fund and institutional investor sentiment towards Washington Prime Group Inc. (NYSE:WPG).
Washington Prime Group Inc. (NYSE:WPG) shares haven't seen a lot of action during the second quarter. Overall, hedge fund sentiment was unchanged. The stock was in 11 hedge funds' portfolios at the end of the second quarter of 2019. At the end of this article we will also compare WPG to other stocks including Camden National Corporation (NASDAQ:CAC), PlayAGS, Inc. (NYSE:AGS), and ArcBest Corp (NASDAQ:ARCB) to get a better sense of its popularity. Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? Our research has shown that hedge funds' small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the market by 40 percentage points since May 2014 through May 30, 2019 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter. Even if you aren't comfortable with shorting stocks, you should at least avoid initiating long positions in our short portfolio.
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 Washington Prime Group Inc. (NYSE:WPG).
Hedge fund activity in Washington Prime Group Inc. (NYSE:WPG)
At the end of the second quarter, a total of 11 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 0% from the first quarter of 2019. Below, you can check out the change in hedge fund sentiment towards WPG over the last 16 quarters. With hedgies' positions undergoing their usual ebb and flow, there exists a select group of key hedge fund managers who were increasing their stakes substantially (or already accumulated large positions).
Among these funds, ZWEIG DIMENNA PARTNERS held the most valuable stake in Washington Prime Group Inc. (NYSE:WPG), which was worth $7 million at the end of the second quarter. On the second spot was Citadel Investment Group which amassed $2.9 million worth of shares. Moreover, Two Sigma Advisors, Miller Value Partners, and Arrowstreet Capital were also bullish on Washington Prime Group Inc. (NYSE:WPG), allocating a large percentage of their portfolios to this stock.
Due to the fact that Washington Prime Group Inc. (NYSE:WPG) has witnessed falling interest from the entirety of the hedge funds we track, it's safe to say that there exists a select few funds that decided to sell off their positions entirely in the second quarter. It's worth mentioning that Michael Platt and William Reeves's BlueCrest Capital Mgmt. cut the largest investment of the 750 funds tracked by Insider Monkey, totaling close to $0.2 million in stock. Andrew Weiss's fund, Weiss Asset Management, also sold off its stock, about $0.2 million worth. These transactions are interesting, as total hedge fund interest stayed the same (this is a bearish signal in our experience).
Let's go over hedge fund activity in other stocks - not necessarily in the same industry as Washington Prime Group Inc. (NYSE:WPG) but similarly valued. These stocks are Camden National Corporation (NASDAQ:CAC), PlayAGS, Inc. (NYSE:AGS), ArcBest Corp (NASDAQ:ARCB), and AdvanSix Inc. (NYSE:ASIX). This group of stocks' market values resemble WPG's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position CAC,10,71124,4 AGS,12,81504,-10 ARCB,16,62849,4 ASIX,15,115979,-4 Average,13.25,82864,-1.5 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 13.25 hedge funds with bullish positions and the average amount invested in these stocks was $83 million. That figure was $18 million in WPG's case. ArcBest Corp (NASDAQ:ARCB) is the most popular stock in this table. On the other hand Camden National Corporation (NASDAQ:CAC) is the least popular one with only 10 bullish hedge fund positions. Washington Prime Group Inc. (NYSE:WPG) is not the least popular stock in this group but hedge fund interest is still below average. 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. A small number of hedge funds were also right about betting on WPG as the stock returned 16.7% during the same time frame and outperformed the market by an even larger margin.
Disclosure: None. This article was originally published at Insider Monkey.