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Were Hedge Funds Right About Workhorse Group, Inc. (WKHS)?

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·6 min read
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Hedge Funds and other institutional investors have just completed filing their 13Fs with the Securities and Exchange Commission, revealing their equity portfolios as of the end of September. At Insider Monkey, we follow nearly 900 active hedge funds and notable investors and by analyzing their 13F filings, we can determine the stocks that they are collectively bullish on. One of their picks is Workhorse Group, Inc. (NASDAQ:WKHS), so let’s take a closer look at the sentiment that surrounds it in the current quarter.

Workhorse Group, Inc. (NASDAQ:WKHS) shares haven't seen a lot of action during the second quarter. Overall, hedge fund sentiment was unchanged. The stock was in 16 hedge funds' portfolios at the end of the first quarter of 2021. Our calculations also showed that WKHS isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings). At the end of this article we will also compare WKHS to other stocks including Sykes Enterprises, Incorporated (NASDAQ:SYKE), Air Transport Services Group Inc. (NASDAQ:ATSG), and Atlas Air Worldwide Holdings, Inc. (NASDAQ:AAWW) to get a better sense of its popularity.

To most stock holders, hedge funds are assumed to be worthless, outdated investment vehicles of yesteryear. While there are greater than 8000 funds in operation today, Our experts choose to focus on the moguls of this club, approximately 850 funds. These investment experts control bulk of all hedge funds' total asset base, and by tailing their finest equity investments, Insider Monkey has formulated numerous investment strategies that have historically outpaced Mr. Market. Insider Monkey's flagship short hedge fund strategy beat the S&P 500 short ETFs by around 20 percentage points per annum since its inception in March 2017. Also, our monthly newsletter's portfolio of long stock picks returned 206.8% since March 2017 (through May 2021) and beat the S&P 500 Index by more than 115 percentage points. You can download a sample issue of this newsletter on our website .


Philippe Laffont of Coatue Management

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, pet market is growing at a 7% annual rate and is expected to reach $110 billion in 2021. So, we are checking out the 5 best stocks for animal lovers. We go through lists like the 15 best Jim Cramer stocks to identify the next Tesla that will deliver outsized returns. 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 homepage. Keeping this in mind we're going to check out the key hedge fund action encompassing Workhorse Group, Inc. (NASDAQ:WKHS).

Do Hedge Funds Think WKHS Is A Good Stock To Buy Now?

At the end of March, a total of 16 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 0% from the fourth quarter of 2020. Below, you can check out the change in hedge fund sentiment towards WKHS over the last 23 quarters. With hedge funds' sentiment swirling, there exists a select group of key hedge fund managers who were boosting their stakes significantly (or already accumulated large positions).

Is WKHS A Good Stock To Buy?
Is WKHS A Good Stock To Buy?

More specifically, ARK Investment Management was the largest shareholder of Workhorse Group, Inc. (NASDAQ:WKHS), with a stake worth $55.1 million reported as of the end of March. Trailing ARK Investment Management was Citadel Investment Group, which amassed a stake valued at $25.1 million. Citadel Investment Group, Antara Capital, and OZ Management 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 Antara Capital allocated the biggest weight to Workhorse Group, Inc. (NASDAQ:WKHS), around 0.85% of its 13F portfolio. Water Street Capital is also relatively very bullish on the stock, setting aside 0.14 percent of its 13F equity portfolio to WKHS.

Seeing as Workhorse Group, Inc. (NASDAQ:WKHS) has experienced a decline in interest from hedge fund managers, we can see that there were a few hedgies that elected to cut their positions entirely heading into Q2. Interestingly, Shashin Shah's Think Investments cut the biggest stake of all the hedgies tracked by Insider Monkey, totaling close to $12 million in stock, and Till Bechtolsheimer's Arosa Capital Management was right behind this move, as the fund dumped about $10.2 million worth. These transactions are important to note, 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 similar to Workhorse Group, Inc. (NASDAQ:WKHS). These stocks are Sykes Enterprises, Incorporated (NASDAQ:SYKE), Air Transport Services Group Inc. (NASDAQ:ATSG), Atlas Air Worldwide Holdings, Inc. (NASDAQ:AAWW), Silk Road Medical, Inc. (NASDAQ:SILK), Kymera Therapeutics, Inc. (NASDAQ:KYMR), Evolent Health Inc (NYSE:EVH), and NBT Bancorp Inc. (NASDAQ:NBTB). This group of stocks' market values are similar to WKHS's market value.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position SYKE,14,47486,-3 ATSG,18,73185,2 AAWW,29,336252,-6 SILK,21,118208,-6 KYMR,16,346189,1 EVH,22,344398,4 NBTB,6,10908,-5 Average,18,182375,-1.9 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 18 hedge funds with bullish positions and the average amount invested in these stocks was $182 million. That figure was $97 million in WKHS's case. Atlas Air Worldwide Holdings, Inc. (NASDAQ:AAWW) is the most popular stock in this table. On the other hand NBT Bancorp Inc. (NASDAQ:NBTB) is the least popular one with only 6 bullish hedge fund positions. Workhorse Group, Inc. (NASDAQ:WKHS) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for WKHS is 56.7. 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. This is a slightly negative signal and we'd rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 28.5% in 2021 through July 23rd and surpassed the market again by 10.1 percentage points. Unfortunately WKHS wasn't nearly as popular as these 5 stocks (hedge fund sentiment was quite bearish); WKHS investors were disappointed as the stock returned -21.6% since the end of March (through 7/23) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2021.

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Disclosure: None. This article was originally published at Insider Monkey.