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Is Wix.Com Ltd (WIX) Going to Burn These Hedge Funds?

Asma UL Husna

Our extensive research has shown that imitating the smart money can generate significant returns for retail investors, which is why we track nearly 750 active prominent money managers and analyze their quarterly 13F filings. The stocks that are heavily bought by hedge funds historically outperformed the market, though there is no shortage of high profile failures like hedge funds' 2018 losses in Facebook and Apple. Let’s take a closer look at what the funds we track think about Wix.Com Ltd (NASDAQ:WIX) in this article.

Is Wix.Com Ltd (NASDAQ:WIX) the right investment to pursue these days? The best stock pickers are reducing their bets on the stock. The number of long hedge fund bets retreated by 1 in recent months. Our calculations also showed that WIX isn't among the 30 most popular stocks among hedge funds (see the video below). WIX was in 26 hedge funds' portfolios at the end of the second quarter of 2019. There were 27 hedge funds in our database with WIX positions at the end of the previous quarter. Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

5 Most Popular Stocks Among Hedge Funds

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that hedge funds' large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were 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'll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 25.7% through September 30, 2019. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

WIX_oct2019

Unlike this former hedge fund manager 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 take a glance at the recent hedge fund action encompassing Wix.Com Ltd (NASDAQ:WIX).

How are hedge funds trading Wix.Com Ltd (NASDAQ:WIX)?

Heading into the third quarter of 2019, a total of 26 of the hedge funds tracked by Insider Monkey were long this stock, a change of -4% from the first quarter of 2019. By comparison, 27 hedge funds held shares or bullish call options in WIX a year ago. So, let's see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

David Harding

More specifically, Steadfast Capital Management was the largest shareholder of Wix.Com Ltd (NASDAQ:WIX), with a stake worth $238.2 million reported as of the end of March. Trailing Steadfast Capital Management was Renaissance Technologies, which amassed a stake valued at $232.7 million. Sylebra Capital Management, SQN Investors, and Soroban Capital Partners were also very fond of the stock, giving the stock large weights in their portfolios.

Seeing as Wix.Com Ltd (NASDAQ:WIX) has experienced declining sentiment from the entirety of the hedge funds we track, logic holds that there lies a certain "tier" of hedgies that elected to cut their full holdings last quarter. At the top of the heap, Peter Muller's PDT Partners dropped the biggest position of the 750 funds monitored by Insider Monkey, valued at about $15.8 million in stock. Cliff Asness's fund, AQR Capital Management, also dumped its stock, about $0.9 million worth. These moves are intriguing to say the least, as aggregate hedge fund interest dropped by 1 funds last quarter.

Let's now take a look at hedge fund activity in other stocks - not necessarily in the same industry as Wix.Com Ltd (NASDAQ:WIX) but similarly valued. We will take a look at Unum Group (NYSE:UNM), ServiceMaster Global Holdings Inc (NYSE:SERV), EnCana Corporation (NYSE:ECA), and TIM Participacoes SA (NYSE:TSU). This group of stocks' market values are similar to WIX's market value.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position UNM,25,493510,0 SERV,30,794886,6 ECA,32,464569,-12 TSU,12,306449,-4 Average,24.75,514854,-2.5 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 24.75 hedge funds with bullish positions and the average amount invested in these stocks was $515 million. That figure was $1073 million in WIX's case. EnCana Corporation (NYSE:ECA) is the most popular stock in this table. On the other hand TIM Participacoes SA (NYSE:TSU) is the least popular one with only 12 bullish hedge fund positions. Wix.Com Ltd (NASDAQ:WIX) 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. 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. Unfortunately WIX wasn't nearly as popular as these 20 stocks and hedge funds that were betting on WIX were disappointed as the stock returned -17.8% during the third quarter and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.

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

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