Did Hedge Funds Make The Right Call On Welbilt, Inc. (WBT) ?
Debasis Saha
6 min read
The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We at Insider Monkey have plowed through 821 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds' and investors' portfolio positions as of March 31st, a week after the market trough. We are almost done with the second quarter. Investors decided to bet on the economic recovery and a stock market rebound. S&P 500 Index returned almost 20% this quarter. In this article we look at how hedge funds traded Welbilt, Inc. (NYSE:WBT) and determine whether the smart money was really smart about this stock.
Welbilt, Inc. (NYSE:WBT) investors should pay attention to a decrease in support from the world's most elite money managers recently. Our calculations also showed that WBT isn't among the 30 most popular stocks among hedge funds (click for Q1 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.
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 was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 58 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'll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 36% through May 18th. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, on one site we found out that NBA champion Isiah Thomas is now the CEO of this cannabis company. The same site also talks about a snack manufacturer that’s growing at 30% annually. 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. Hedge fund sentiment towards Tesla reached its all time high at the end of 2019 and Tesla shares more than tripled this year. We are trying to identify other EV revolution winners, so if you have any good ideas send us an email. With all of this in mind we're going to view the new hedge fund action encompassing Welbilt, Inc. (NYSE:WBT).
How have hedgies been trading Welbilt, Inc. (NYSE:WBT)?
Heading into the second quarter of 2020, a total of 25 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -11% from one quarter earlier. By comparison, 27 hedge funds held shares or bullish call options in WBT a year ago. With hedgies' sentiment swirling, there exists a few key hedge fund managers who were adding to their holdings substantially (or already accumulated large positions).
Is WBT A Good Stock To Buy?
More specifically, Icahn Capital LP was the largest shareholder of Welbilt, Inc. (NYSE:WBT), with a stake worth $61.3 million reported as of the end of September. Trailing Icahn Capital LP was Impax Asset Management, which amassed a stake valued at $56.7 million. Gates Capital Management, Adage Capital Management, and Renaissance Technologies 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 Gates Capital Management allocated the biggest weight to Welbilt, Inc. (NYSE:WBT), around 1.84% of its 13F portfolio. 13D Management is also relatively very bullish on the stock, dishing out 1.74 percent of its 13F equity portfolio to WBT.
Because Welbilt, Inc. (NYSE:WBT) has experienced declining sentiment from the entirety of the hedge funds we track, it's safe to say that there lies a certain "tier" of hedge funds that decided to sell off their positions entirely last quarter. It's worth mentioning that Matt Sirovich and Jeremy Mindich's Scopia Capital said goodbye to the biggest stake of all the hedgies monitored by Insider Monkey, worth about $43.5 million in stock. Barry Dargan's fund, Intermede Investment Partners, also dropped its stock, about $34.6 million worth. These moves are important to note, as total hedge fund interest was cut by 3 funds last quarter.
Let's also examine hedge fund activity in other stocks similar to Welbilt, Inc. (NYSE:WBT). These stocks are Kearny Financial Corp. (NASDAQ:KRNY), Omeros Corporation (NASDAQ:OMER), Heritage Financial Corporation (NASDAQ:HFWA), and Aprea Therapeutics, Inc. (NASDAQ:APRE). This group of stocks' market values match WBT's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position KRNY,15,74519,-6 OMER,9,125041,2 HFWA,6,12043,0 APRE,6,159769,1 Average,9,92843,-0.75 [/table]
As you can see these stocks had an average of 9 hedge funds with bullish positions and the average amount invested in these stocks was $93 million. That figure was $198 million in WBT's case. Kearny Financial Corp. (NASDAQ:KRNY) is the most popular stock in this table. On the other hand Heritage Financial Corporation (NASDAQ:HFWA) is the least popular one with only 6 bullish hedge fund positions. Compared to these stocks Welbilt, Inc. (NYSE:WBT) is more popular among hedge funds. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 12.3% in 2020 through June 30th and still beat the market by 15.5 percentage points. Unfortunately WBT wasn't nearly as popular as these 10 stocks and hedge funds that were betting on WBT were disappointed as the stock returned 18.7% during the second 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 10 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.
