We know that hedge funds generate strong, risk-adjusted returns over the long run, which is why imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, professional investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn't mean that they don't have occasional colossal losses; they do. However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, let’s examine the smart money sentiment towards Wix.Com Ltd (NASDAQ:WIX) and determine whether hedge funds skillfully traded this stock.
Wix.Com Ltd (NASDAQ:WIX) shareholders have witnessed a decrease in support from the world's most elite money managers lately. Wix.Com Ltd (NASDAQ:WIX) was in 27 hedge funds' portfolios at the end of June. The all time high for this statistics is 34. Our calculations also showed that WIX isn't among the 30 most popular stocks among hedge funds (click for Q2 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.
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey's monthly stock picks returned 101% since March 2017 and outperformed the S&P 500 ETFs by more than 56 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That's why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
John Overdeck of Two Sigma
John Overdeck of Two Sigma Advisors
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, legal marijuana is one of the fastest growing industries right now, so we are checking out stock pitches like “the Starbucks of cannabis” to identify the next tenbagger. 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 to get excerpts of these letters in your inbox. Keeping this in mind we're going to analyze the new hedge fund action regarding Wix.Com Ltd (NASDAQ:WIX).
How have hedgies been trading Wix.Com Ltd (NASDAQ:WIX)?
At Q2's end, a total of 27 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -7% from the first quarter of 2020. By comparison, 26 hedge funds held shares or bullish call options in WIX 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, Steadfast Capital Management held the most valuable stake in Wix.Com Ltd (NASDAQ:WIX), which was worth $421.1 million at the end of the third quarter. On the second spot was Renaissance Technologies which amassed $299.8 million worth of shares. Two Sigma Advisors, Isomer Partners, and Praesidium Investment Management Company 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 Isomer Partners allocated the biggest weight to Wix.Com Ltd (NASDAQ:WIX), around 20.53% of its 13F portfolio. Blackcrane Capital is also relatively very bullish on the stock, dishing out 18.08 percent of its 13F equity portfolio to WIX.
Since Wix.Com Ltd (NASDAQ:WIX) has faced falling interest from the smart money, it's safe to say that there lies a certain "tier" of fund managers that decided to sell off their full holdings by the end of the second quarter. It's worth mentioning that Carl Anderson's Marcho Partners dropped the biggest investment of all the hedgies watched by Insider Monkey, comprising about $7.6 million in stock. Noam Gottesman's fund, GLG Partners, also cut its stock, about $7 million worth. These moves are interesting, as aggregate hedge fund interest was cut by 2 funds by the end of the second quarter.
Let's go over hedge fund activity in other stocks - not necessarily in the same industry as Wix.Com Ltd (NASDAQ:WIX) but similarly valued. These stocks are Masco Corporation (NYSE:MAS), The Liberty SiriusXM Group (NASDAQ:LSXMA), Western Digital Corporation (NASDAQ:WDC), MongoDB, Inc. (NASDAQ:MDB), Tradeweb Markets Inc. (NASDAQ:TW), Mid America Apartment Communities Inc (NYSE:MAA), and Liberty Global plc (NASDAQ:LBTYA). This group of stocks' market caps are closest to WIX's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position MAS,40,827096,6 LSXMA,46,1294569,-2 WDC,49,583698,4 MDB,37,1248081,7 TW,33,346714,3 MAA,30,503965,4 LBTYA,29,1048280,-1 Average,37.7,836058,3 [/table]
As you can see these stocks had an average of 37.7 hedge funds with bullish positions and the average amount invested in these stocks was $836 million. That figure was $1258 million in WIX's case. Western Digital Corporation (NASDAQ:WDC) is the most popular stock in this table. On the other hand Liberty Global plc (NASDAQ:LBTYA) is the least popular one with only 29 bullish hedge fund positions. Compared to these stocks Wix.Com Ltd (NASDAQ:WIX) is even less popular than LBTYA. Our overall hedge fund sentiment score for WIX is 21.8. 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 dodged a bullet by taking a bearish stance towards WIX. Our calculations showed that the top 10 most popular hedge fund stocks returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 21.3% in 2020 through September 25th but managed to beat the market by 17.7 percentage points. Unfortunately WIX wasn't nearly as popular as these 10 stocks (hedge fund sentiment was very bearish); WIX investors were disappointed as the stock returned -3.1% since the end of Q2 (through 9/25) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as most of these stocks already outperformed the market so far in 2020.
