We are still in an overall bull market and many stocks that smart money investors were piling into surged through October 17th. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained 45% and 39% respectively. Hedge funds' top 3 stock picks returned 34.4% this year and beat the S&P 500 ETFs by 13 percentage points. Investing in index funds guarantees you average returns, not superior returns. We are looking to generate superior returns for our readers. That's why we believe it isn't a waste of time to check out hedge fund sentiment before you invest in a stock like World Acceptance Corporation (NASDAQ:WRLD).
World Acceptance Corporation (NASDAQ:WRLD) has experienced a decrease in enthusiasm from smart money recently. WRLD was in 11 hedge funds' portfolios at the end of the second quarter of 2019. There were 13 hedge funds in our database with WRLD holdings at the end of the previous quarter. Our calculations also showed that WRLD isn't among the 30 most popular stocks among hedge funds (see the video below). Video: Click the image to 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' 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.
Unlike former hedge manager, Dr. Steve Sjuggerud, 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 look at the new hedge fund action encompassing World Acceptance Corporation (NASDAQ:WRLD).
What does smart money think about World Acceptance Corporation (NASDAQ:WRLD)?
Heading into the third quarter of 2019, a total of 11 of the hedge funds tracked by Insider Monkey were long this stock, a change of -15% from one quarter earlier. By comparison, 14 hedge funds held shares or bullish call options in WRLD a year ago. So, let's examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Nantahala Capital Management held the most valuable stake in World Acceptance Corporation (NASDAQ:WRLD), which was worth $101.3 million at the end of the second quarter. On the second spot was CAS Investment Partners which amassed $95.4 million worth of shares. Moreover, Renaissance Technologies, Bronte Capital, and D E Shaw were also bullish on World Acceptance Corporation (NASDAQ:WRLD), allocating a large percentage of their portfolios to this stock.
Due to the fact that World Acceptance Corporation (NASDAQ:WRLD) has faced falling interest from the entirety of the hedge funds we track, it's easy to see that there exists a select few funds that elected to cut their full holdings last quarter. It's worth mentioning that Andrew Bellas's General Equity Partners cut the largest investment of all the hedgies followed by Insider Monkey, valued at about $13.4 million in stock. James Thomas Berylson's fund, Berylson Capital Partners, also said goodbye to its stock, about $3.5 million worth. These transactions are intriguing to say the least, as total hedge fund interest was cut by 2 funds last quarter.
Let's also examine hedge fund activity in other stocks similar to World Acceptance Corporation (NASDAQ:WRLD). These stocks are Ebix Inc (NASDAQ:EBIX), ShockWave Medical, Inc. (NASDAQ:SWAV), Hailiang Education Group Inc. (NASDAQ:HLG), and Group 1 Automotive, Inc. (NYSE:GPI). This group of stocks' market values resemble WRLD's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position EBIX,18,158386,-4 SWAV,7,111937,-7 HLG,2,6378,-1 GPI,13,153111,0 Average,10,107453,-3 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 10 hedge funds with bullish positions and the average amount invested in these stocks was $107 million. That figure was $279 million in WRLD's case. Ebix Inc (NASDAQ:EBIX) is the most popular stock in this table. On the other hand Hailiang Education Group Inc. (NASDAQ:HLG) is the least popular one with only 2 bullish hedge fund positions. World Acceptance Corporation (NASDAQ:WRLD) 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 WRLD wasn't nearly as popular as these 20 stocks and hedge funds that were betting on WRLD were disappointed as the stock returned -22.3% 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.