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Where Do Hedge Funds Stand On Willdan Group, Inc. (WLDN)?

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Abigail Fisher
·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 817 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 Willdan Group, Inc. (NASDAQ:WLDN), so let’s take a closer look at the sentiment that surrounds it in the current quarter.

Willdan Group, Inc. (NASDAQ:WLDN) has experienced a decrease in enthusiasm from smart money lately. Willdan Group, Inc. (NASDAQ:WLDN) was in 3 hedge funds' portfolios at the end of September. The all time high for this statistics is 13. Our calculations also showed that WLDN 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.

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 S&P 500 ETFs by more than 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. Even if you aren't comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.

Mario Gabelli of GAMCO Investors

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 10 most profitable companies in the world 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. Now we're going to take a look at the new hedge fund action regarding Willdan Group, Inc. (NASDAQ:WLDN).

How are hedge funds trading Willdan Group, Inc. (NASDAQ:WLDN)?

Heading into the fourth quarter of 2020, a total of 3 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -25% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in WLDN over the last 21 quarters. So, let's check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

The largest stake in Willdan Group, Inc. (NASDAQ:WLDN) was held by Arosa Capital Management, which reported holding $8.1 million worth of stock at the end of September. It was followed by GAMCO Investors with a $0.6 million position. The only other hedge fund that is bullish on the company was Winton Capital Management.

We view hedge fund activity in the stock unfavorable, but in this case there was only a single hedge fund selling its entire position: Citadel Investment Group. One hedge fund selling its entire position doesn't always imply a bearish intent. Theoretically a hedge fund may decide to sell a promising position in order to invest the proceeds in a more promising idea. However, we don't think this is the case in this case because none of the 750+ hedge funds tracked by Insider Monkey identified WLDN as a viable investment and initiated a position in the stock.

Let's check out hedge fund activity in other stocks - not necessarily in the same industry as Willdan Group, Inc. (NASDAQ:WLDN) but similarly valued. We will take a look at Farmers National Banc Corp (NASDAQ:FMNB), Catalyst Pharmaceuticals, Inc. (NASDAQ:CPRX), CytomX Therapeutics, Inc. (NASDAQ:CTMX), Hooker Furniture Corporation (NASDAQ:HOFT), Americas Gold and Silver Corporation (NYSE:USAS), OneWater Marine Inc. (NASDAQ:ONEW), and Del Taco Restaurants Inc (NASDAQ:TACO). This group of stocks' market caps resemble WLDN's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position FMNB,9,7526,1 CPRX,17,57604,-5 CTMX,20,74703,-2 HOFT,10,84583,2 USAS,4,6087,-2 ONEW,11,38634,6 TACO,15,21195,3 Average,12.3,41476,0.4 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 12.3 hedge funds with bullish positions and the average amount invested in these stocks was $41 million. That figure was $9 million in WLDN's case. CytomX Therapeutics, Inc. (NASDAQ:CTMX) is the most popular stock in this table. On the other hand Americas Gold and Silver Corporation (NYSE:USAS) is the least popular one with only 4 bullish hedge fund positions. Compared to these stocks Willdan Group, Inc. (NASDAQ:WLDN) is even less popular than USAS. Our overall hedge fund sentiment score for WLDN is 10.9. 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. Hedge funds clearly dropped the ball on WLDN as the stock delivered strong returns, though hedge funds' consensus picks still generated respectable returns. 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 28.1% in 2020 through November 23rd and still beat the market by 15.4 percentage points. A small number of hedge funds were also right about betting on WLDN as the stock returned 47% since Q3 (through November 23rd) and outperformed the market by an even larger margin.

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

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