Do Hedge Funds Love Wright Medical Group N.V. (WMGI)?
In this article we will check out the progression of hedge fund sentiment towards Wright Medical Group N.V. (NASDAQ:WMGI) and determine whether it is a good investment right now. We at Insider Monkey like to examine what billionaires and hedge funds think of a company before spending days of research on it. Given their 2 and 20 payment structure, hedge funds have more incentives and resources than the average investor. The funds have access to expert networks and get tips from industry insiders. They also employ numerous Ivy League graduates and MBAs. Like everyone else, hedge funds perform miserably at times, but their consensus picks have historically outperformed the market after risk adjustments.
Wright Medical Group N.V. (NASDAQ:WMGI) shareholders have witnessed a decrease in hedge fund sentiment of late. Our calculations also showed that WMGI 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.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 51 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.
[caption id="attachment_140292" align="aligncenter" width="393"]
Israel Englander of Millennium Management[/caption]
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, 2020's unprecedented market conditions provide us with the highest number of trading opportunities in a decade. So we are checking out trades like this one. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind we're going to take a look at the latest hedge fund action encompassing Wright Medical Group N.V. (NASDAQ:WMGI).
How have hedgies been trading Wright Medical Group N.V. (NASDAQ:WMGI)?
Heading into the second quarter of 2020, a total of 37 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -20% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards WMGI over the last 18 quarters. So, let's find out 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, Magnetar Capital, managed by Alec Litowitz and Ross Laser, holds the biggest position in Wright Medical Group N.V. (NASDAQ:WMGI). Magnetar Capital has a $142.9 million position in the stock, comprising 3.4% of its 13F portfolio. The second largest stake is held by Millennium Management, led by Israel Englander, holding a $132.3 million position; the fund has 0.3% of its 13F portfolio invested in the stock. Remaining professional money managers that hold long positions consist of Carl Tiedemann and Michael Tiedemann's TIG Advisors, Clint Carlson's Carlson Capital and Simon Sadler's Segantii Capital. In terms of the portfolio weights assigned to each position Havens Advisors allocated the biggest weight to Wright Medical Group N.V. (NASDAQ:WMGI), around 8.8% of its 13F portfolio. White Square Capital is also relatively very bullish on the stock, dishing out 7.88 percent of its 13F equity portfolio to WMGI.
Because Wright Medical Group N.V. (NASDAQ:WMGI) has experienced a decline in interest from the aggregate hedge fund industry, logic holds that there were a few funds that slashed their entire stakes last quarter. At the top of the heap, Robert Emil Zoellner's Alpine Associates sold off the largest position of the 750 funds monitored by Insider Monkey, totaling close to $161.5 million in stock. Andrew Kurita's fund, Kettle Hill Capital Management, also dumped its stock, about $33.8 million worth. These transactions are important to note, as aggregate hedge fund interest fell by 9 funds last quarter.
Let's also examine hedge fund activity in other stocks similar to Wright Medical Group N.V. (NASDAQ:WMGI). These stocks are Jefferies Financial Group Inc. (NYSE:JEF), Highwoods Properties Inc (NYSE:HIW), Grand Canyon Education Inc (NASDAQ:LOPE), and ServiceMaster Global Holdings Inc (NYSE:SERV). All of these stocks' market caps resemble WMGI's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position JEF,30,401708,-1 HIW,15,101293,-1 LOPE,28,185626,8 SERV,31,593890,-11 Average,26,320629,-1.25 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 26 hedge funds with bullish positions and the average amount invested in these stocks was $321 million. That figure was $878 million in WMGI's case. ServiceMaster Global Holdings Inc (NYSE:SERV) is the most popular stock in this table. On the other hand Highwoods Properties Inc (NYSE:HIW) is the least popular one with only 15 bullish hedge fund positions. Compared to these stocks Wright Medical Group N.V. (NASDAQ:WMGI) 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 8.3% in 2020 through the end of May and still beat the market by 13.2 percentage points. Unfortunately WMGI wasn't nearly as popular as these 10 stocks and hedge funds that were betting on WMGI were disappointed as the stock returned 3.1% during the second quarter (through the end of May) 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.
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Disclosure: None. This article was originally published at Insider Monkey.
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