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The financial regulations require hedge funds and wealthy investors that exceeded the $100 million equity holdings threshold to file a report that shows their positions at the end of every quarter. Even though it isn't the intention, these filings to a certain extent level the playing field for ordinary investors. The latest round of 13F filings disclosed the funds' positions on September 30th, about a month before the elections. We at Insider Monkey have made an extensive database of more than 817 of those established hedge funds and famous value investors' filings. In this article, we analyze how these elite funds and prominent investors traded WD-40 Company (NASDAQ:WDFC) based on those filings.
Is WDFC a good stock to buy now? WD-40 Company (NASDAQ:WDFC) has seen an increase in hedge fund interest in recent months. WD-40 Company (NASDAQ:WDFC) was in 17 hedge funds' portfolios at the end of September. The all time high for this statistic is 19. Our calculations also showed that WDFC isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video for a quick look at the top 5 stocks).
Video: 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' 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 S&P 500 ETFs by 66 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 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.
Roger Ibbotson of Zebra Capital Management
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 15 best blue chip stocks to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our website. Keeping this in mind let's view the latest hedge fund action encompassing WD-40 Company (NASDAQ:WDFC).
Do Hedge Funds Think WDFC Is A Good Stock To Buy Now?
At the end of September, a total of 17 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 13% from one quarter earlier. On the other hand, there were a total of 19 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.
More specifically, Renaissance Technologies was the largest shareholder of WD-40 Company (NASDAQ:WDFC), with a stake worth $93.6 million reported as of the end of September. Trailing Renaissance Technologies was GLG Partners, which amassed a stake valued at $34.5 million. GAMCO Investors, Winton Capital Management, and Citadel Investment Group 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 Zebra Capital Management allocated the biggest weight to WD-40 Company (NASDAQ:WDFC), around 1.74% of its 13F portfolio. Winton Capital Management is also relatively very bullish on the stock, earmarking 0.23 percent of its 13F equity portfolio to WDFC.
As industrywide interest jumped, some big names have been driving this bullishness. Arrowstreet Capital, managed by Peter Rathjens, Bruce Clarke and John Campbell, established the biggest position in WD-40 Company (NASDAQ:WDFC). Arrowstreet Capital had $1.6 million invested in the company at the end of the quarter. Roger Ibbotson's Zebra Capital Management also made a $1.1 million investment in the stock during the quarter. The other funds with new positions in the stock are Donald Sussman's Paloma Partners, Karim Abbadi and Edward McBride's Centiva Capital, and Michael Gelband's ExodusPoint Capital.
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. We will take a look at Sunnova Energy International Inc. (NYSE:NOVA), Tenet Healthcare Corp (NYSE:THC), ShockWave Medical, Inc. (NASDAQ:SWAV), Nu Skin Enterprises, Inc. (NYSE:NUS), Tegna Inc (NYSE:TGNA), Pacira Biosciences Inc (NASDAQ:PCRX), and Cleveland-Cliffs Inc (NYSE:CLF). This group of stocks' market caps are closest to WDFC's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position NOVA,23,422856,13 THC,33,791683,5 SWAV,16,135654,4 NUS,22,315274,-3 TGNA,27,285889,-2 PCRX,25,519535,-4 CLF,22,314755,-3 Average,24,397949,1.4 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 24 hedge funds with bullish positions and the average amount invested in these stocks was $398 million. That figure was $163 million in WDFC's case. Tenet Healthcare Corp (NYSE:THC) is the most popular stock in this table. On the other hand ShockWave Medical, Inc. (NASDAQ:SWAV) is the least popular one with only 16 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. Our overall hedge fund sentiment score for WDFC is 36.8. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. 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 percentage points. These stocks gained 30.7% in 2020 through December 14th and still beat the market by 15.8 percentage points. A small number of hedge funds were also right about betting on WDFC as the stock returned 38.1% since the end of the third quarter (through 12/14) and outperformed the market by an even larger margin.
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Disclosure: None. This article was originally published at Insider Monkey.