Out of thousands of stocks that are currently traded on the market, it is difficult to determine those that can really generate strong returns. Hedge funds and institutional investors spend millions of dollars on analysts with MBAs and PhDs, who are industry experts and well connected to other industry and media insiders on top of that. Individual investors can piggyback the hedge funds employing these talents and can benefit from their vast resources and knowledge in that way. We analyze quarterly 13F filings of over 700 hedge funds and, by looking at the smart money sentiment that surrounds a stock, we can determine whether it has potential to beat the market over the long-term. Therefore, let’s take a closer look at what smart money thinks about Weis Markets, Inc. (NYSE:WMK).
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 market by 18 percentage points since May 2014 through December 3, 2018 (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.
Let's review the fresh hedge fund action encompassing Weis Markets, Inc. (NYSE:WMK).
Hedge fund activity in Weis Markets, Inc. (NYSE:WMK)
At Q3's end, a total of 15 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 7% from the second quarter of 2018. On the other hand, there were a total of 12 hedge funds with a bullish position in WMK at the beginning of this year. So, let's find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Royce & Associates held the most valuable stake in Weis Markets, Inc. (NYSE:WMK), which was worth $55.4 million at the end of the third quarter. On the second spot was Arrowstreet Capital which amassed $12.2 million worth of shares. Moreover, Renaissance Technologies, GAMCO Investors, and Citadel Investment Group were also bullish on Weis Markets, Inc. (NYSE:WMK), allocating a large percentage of their portfolios to this stock.
As one would reasonably expect, key money managers have been driving this bullishness. Laurion Capital Management, managed by Benjamin A. Smith, assembled the most outsized position in Weis Markets, Inc. (NYSE:WMK). Laurion Capital Management had $1.1 million invested in the company at the end of the quarter. Ken Griffin's Citadel Investment Group also initiated a $0.4 million position during the quarter. The only other fund with a new position in the stock is John Overdeck and David Siegel's Two Sigma Advisors.
Let's go over hedge fund activity in other stocks similar to Weis Markets, Inc. (NYSE:WMK). We will take a look at Astec Industries, Inc. (NASDAQ:ASTE), CorePoint Lodging Inc. (NYSE:CPLG), Hannon Armstrong Sustnbl Infrstr Cap Inc (NYSE:HASI), and InVitae Corporation (NYSE:NVTA). This group of stocks' market valuations resemble WMK's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position ASTE,10,126988,3 CPLG,23,239001,3 HASI,6,16321,0 NVTA,20,318967,7 Average,14.75,175319,3.25 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 14.75 hedge funds with bullish positions and the average amount invested in these stocks was $175 million. That figure was $89 million in WMK's case. CorePoint Lodging Inc. (NYSE:CPLG) is the most popular stock in this table. On the other hand Hannon Armstrong Sustnbl Infrstr Cap Inc (NYSE:HASI) is the least popular one with only 6 bullish hedge fund positions. Weis Markets, Inc. (NYSE:WMK) 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. In this regard CPLG might be a better candidate to consider a long position.
Disclosure: None. This article was originally published at Insider Monkey.