Is Weibo Corp (NASDAQ:WB) a good place to invest some of your money right now? We can gain invaluable insight to help us answer that question by studying the investment trends of top investors, who employ world-class Ivy League graduates, who are given immense resources and industry contacts to put their financial expertise to work. The top picks of these firms have historically outperformed the market when we account for known risk factors, making them very valuable investment ideas.
Is WB a good stock to buy now? The smart money was turning less bullish. The number of bullish hedge fund positions were cut by 1 recently. Weibo Corp (NASDAQ:WB) was in 13 hedge funds' portfolios at the end of September. The all time high for this statistic is 29. Our calculations also showed that WB isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video for a quick look at the top 5 stocks). There were 14 hedge funds in our database with WB positions at the end of the second quarter.
Video: Watch our video about the top 5 most popular hedge fund stocks.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? Our research has shown that hedge funds' small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 66 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 underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter. Even if you aren't comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.
John Petry Sessa Capital
John Petry of Sessa Capital
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 15 best blue chip stocks 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. Keeping this in mind we're going to go over the new hedge fund action surrounding Weibo Corp (NASDAQ:WB).
Do Hedge Funds Think WB Is A Good Stock To Buy Now?
At Q3's end, a total of 13 of the hedge funds tracked by Insider Monkey were long this stock, a change of -7% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in WB over the last 21 quarters. With hedgies' sentiment swirling, there exists a few noteworthy hedge fund managers who were upping their stakes meaningfully (or already accumulated large positions).
Is WB A Good Stock To Buy?
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Half Sky Capital, managed by Li Ran, holds the largest position in Weibo Corp (NASDAQ:WB). Half Sky Capital has a $40.8 million position in the stock, comprising 14.3% of its 13F portfolio. On Half Sky Capital's heels is Sessa Capital, led by John Petry, holding a $14.6 million position; 1.2% of its 13F portfolio is allocated to the company. Some other professional money managers with similar optimism consist of Joseph Samuels's Islet Management, and Ken Griffin's Citadel Investment Group. In terms of the portfolio weights assigned to each position Half Sky Capital allocated the biggest weight to Weibo Corp (NASDAQ:WB), around 14.35% of its 13F portfolio. Sessa Capital is also relatively very bullish on the stock, earmarking 1.19 percent of its 13F equity portfolio to WB.
Judging by the fact that Weibo Corp (NASDAQ:WB) has experienced a decline in interest from the aggregate hedge fund industry, logic holds that there is a sect of money managers who sold off their positions entirely by the end of the third quarter. Intriguingly, Israel Englander's Millennium Management cut the biggest investment of the 750 funds monitored by Insider Monkey, valued at about $12 million in stock, and Peter Rathjens, Bruce Clarke and John Campbell's Arrowstreet Capital was right behind this move, as the fund cut about $8.4 million worth. These moves are important to note, as aggregate hedge fund interest was cut by 1 funds by the end of the third quarter.
Let's now take a look at hedge fund activity in other stocks - not necessarily in the same industry as Weibo Corp (NASDAQ:WB) but similarly valued. We will take a look at Textron Inc. (NYSE:TXT), News Corp (NASDAQ:NWS), Equitable Holdings, Inc. (NYSE:EQH), CyrusOne Inc (NASDAQ:CONE), Cna Financial Corporation (NYSE:CNA), Westlake Chemical Corporation (NYSE:WLK), and Gaming and Leisure Properties Inc (NASDAQ:GLPI). This group of stocks' market caps are similar to WB's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position TXT,23,477867,-1 NWS,14,39273,-2 EQH,36,1018604,-3 CONE,30,342024,5 CNA,17,59910,5 WLK,26,148658,-3 GLPI,30,634369,-5 Average,25.1,388672,-0.6 [/table]
As you can see these stocks had an average of 25.1 hedge funds with bullish positions and the average amount invested in these stocks was $389 million. That figure was $86 million in WB's case. Equitable Holdings, Inc. (NYSE:EQH) is the most popular stock in this table. On the other hand News Corp (NASDAQ:NWS) is the least popular one with only 14 bullish hedge fund positions. Compared to these stocks Weibo Corp (NASDAQ:WB) is even less popular than NWS. Our overall hedge fund sentiment score for WB is 17.4. 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 clearly dropped the ball on WB 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 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 32.9% in 2020 through December 8th and still beat the market by 16.2 percentage points. A small number of hedge funds were also right about betting on WB as the stock returned 11.9% since Q3 (through December 8th) and outperformed the market by an even larger margin.
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Disclosure: None. This article was originally published at Insider Monkey.
