Did Hedge Funds Drop The Ball On Winnebago Industries, Inc. (WGO) ?

Reymerlyn Martin

Sat, Jun 29, 2019, 9:31 PM

"The global economic environment is very favorable for investors. Economies are generally strong, but not too strong. Employment levels are among the strongest for many decades. Interest rates are paused at very low levels, and the risk of significant increases in the medium term seems low. Financing for transactions is freely available to good borrowers, but not in major excess. Covenants are lighter than they were five years ago, but the extreme excesses seen in the past do not seem prevalent yet today. Despite this apparent ‘goldilocks’ market environment, we continue to worry about a world where politics are polarized almost everywhere, interest rates are low globally, and equity valuations are at their peak," are the words of Brookfield Asset Management. Brookfield was right about politics as stocks experienced their second worst May since the 1960s due to escalation of trade disputes. We pay attention to what hedge funds are doing in a particular stock before considering a potential investment because it works for us. So let’s take a glance at the smart money sentiment towards Winnebago Industries, Inc. (NYSE:WGO) and see how it was affected.

Hedge fund interest in Winnebago Industries, Inc. (NYSE:WGO) shares was flat at the end of last quarter. This is usually a negative indicator. The level and the change in hedge fund popularity aren't the only variables you need to analyze to decipher hedge funds' perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That's why at the end of this article we will examine companies such as Tactile Systems Technology, Inc. (NASDAQ:TCMD), Intersect ENT Inc (NASDAQ:XENT), and Atkore International Group Inc. (NYSE:ATKR) to gather more data points.

If you'd ask most investors, hedge funds are viewed as unimportant, outdated investment vehicles of the past. While there are more than 8000 funds trading at the moment, We choose to focus on the upper echelon of this club, approximately 750 funds. It is estimated that this group of investors control the lion's share of all hedge funds' total asset base, and by following their unrivaled stock picks, Insider Monkey has uncovered a number of investment strategies that have historically outperformed the S&P 500 index. Insider Monkey's flagship hedge fund strategy beat the S&P 500 index by around 5 percentage points per year since its inception in May 2014 through June 18th. We were able to generate large returns even by identifying short candidates. Our portfolio of short stocks lost 28.2% since February 2017 (through June 18th) even though the market was up nearly 30% during the same period. We just shared a list of 5 short targets in our latest quarterly update and they are already down an average of 8.2% in a month whereas our long picks outperformed the market by 2.5 percentage points in this volatile 5 week period (our long picks also beat the market by 15 percentage points so far this year).

We're going to take a glance at the recent hedge fund action surrounding Winnebago Industries, Inc. (NYSE:WGO).

Hedge fund activity in Winnebago Industries, Inc. (NYSE:WGO)

Heading into the second quarter of 2019, a total of 15 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 0% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards WGO over the last 15 quarters. So, let's examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Of the funds tracked by Insider Monkey, Punch Card Capital, managed by Norbest Lou, holds the biggest position in Winnebago Industries, Inc. (NYSE:WGO). Punch Card Capital has a $33.3 million position in the stock, comprising 15.7% of its 13F portfolio. Coming in second is Royce & Associates, managed by Chuck Royce, which holds a $30.5 million position; the fund has 0.3% of its 13F portfolio invested in the stock. Other members of the smart money that hold long positions comprise Brad Dunkley and Blair Levinsky's Waratah Capital Advisors, Clint Carlson's Carlson Capital and Jim Simons's Renaissance Technologies.

Due to the fact that Winnebago Industries, Inc. (NYSE:WGO) has experienced falling interest from the entirety of the hedge funds we track, we can see that there were a few hedgies that elected to cut their full holdings by the end of the third quarter. Interestingly, Michael Platt and William Reeves's BlueCrest Capital Mgmt. cut the biggest position of the 700 funds followed by Insider Monkey, valued at close to $0.4 million in stock. Peter Algert and Kevin Coldiron's fund, Algert Coldiron Investors, also dropped its stock, about $0.3 million worth. These moves are interesting, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).

Let's now take a look at hedge fund activity in other stocks similar to Winnebago Industries, Inc. (NYSE:WGO). We will take a look at Tactile Systems Technology, Inc. (NASDAQ:TCMD), Intersect ENT Inc (NASDAQ:XENT), Atkore International Group Inc. (NYSE:ATKR), and Carbon Black, Inc. (NASDAQ:CBLK). All of these stocks' market caps match WGO's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position TCMD,17,80188,3 XENT,23,263913,3 ATKR,19,104262,2 CBLK,19,59849,2 Average,19.5,127053,2.5 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 19.5 hedge funds with bullish positions and the average amount invested in these stocks was $127 million. That figure was $121 million in WGO's case. Intersect ENT Inc (NASDAQ:XENT) is the most popular stock in this table. On the other hand Tactile Systems Technology, Inc. (NASDAQ:TCMD) is the least popular one with only 17 bullish hedge fund positions. Compared to these stocks Winnebago Industries, Inc. (NYSE:WGO) is even less popular than TCMD. Hedge funds clearly dropped the ball on WGO 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 6.2% in Q2 through June 19th and outperformed the S&P 500 ETF (SPY) by nearly 3 percentage points. A small number of hedge funds were also right about betting on WGO as the stock returned 29.2% during the same period and outperformed the market by an even larger margin.

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

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