Hedge Funds Are Selling Wix.Com Ltd (WIX)

Reymerlyn Martin
Updated

We know that hedge funds generate strong, risk-adjusted returns over the long run, therefore imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, smart money 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 (like Peltz's recent General Electric losses). However, it is still good idea to keep an eye on hedge fund activity. With this in mind, as the current round of 13F filings has just ended, let’s examine the smart money sentiment towards Wix.Com Ltd (NASDAQ:WIX).

Wix.Com Ltd (NASDAQ:WIX) investors should be aware of a decrease in activity from the world's largest hedge funds recently. WIX was in 24 hedge funds' portfolios at the end of the third quarter of 2018. There were 27 hedge funds in our database with WIX holdings at the end of the previous quarter. Our calculations also showed that WIX isn't among the 30 most popular stocks among hedge funds.

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 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 market by 18 percentage points since May 2014 through December 3, 2018 (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.

RENAISSANCE TECHNOLOGIES
RENAISSANCE TECHNOLOGIES

Let's review the key hedge fund action regarding Wix.Com Ltd (NASDAQ:WIX).

How have hedgies been trading Wix.Com Ltd (NASDAQ:WIX)?

At the end of the third quarter, a total of 24 of the hedge funds tracked by Insider Monkey were long this stock, a change of -11% from the second quarter of 2018. On the other hand, there were a total of 16 hedge funds with a bullish position in WIX at the beginning of this year. So, let's see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

WIX_dec2018
WIX_dec2018

Among these funds, Steadfast Capital Management held the most valuable stake in Wix.Com Ltd (NASDAQ:WIX), which was worth $370.9 million at the end of the third quarter. On the second spot was Renaissance Technologies which amassed $197.9 million worth of shares. Moreover, SQN Investors, Arrowstreet Capital, and Two Sigma Advisors were also bullish on Wix.Com Ltd (NASDAQ:WIX), allocating a large percentage of their portfolios to this stock.

Judging by the fact that Wix.Com Ltd (NASDAQ:WIX) has faced falling interest from the aggregate hedge fund industry, logic holds that there were a few hedge funds who were dropping their entire stakes last quarter. At the top of the heap, Paul Marshall and Ian Wace's Marshall Wace LLP dropped the biggest investment of the 700 funds monitored by Insider Monkey, worth an estimated $15.1 million in stock. Dennis Puri and Oliver Keller's fund, Hunt Lane Capital, also sold off its stock, about $15 million worth. These bearish behaviors are important to note, as total hedge fund interest was cut by 3 funds last quarter.

Let's now review hedge fund activity in other stocks - not necessarily in the same industry as Wix.Com Ltd (NASDAQ:WIX) but similarly valued. We will take a look at Globus Medical Inc (NYSE:GMED), Manpowergroup Inc (NYSE:MAN), United Therapeutics Corporation (NASDAQ:UTHR), and GCI Liberty, Inc. (NASDAQ:GLIBA). All of these stocks' market caps match WIX's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position GMED,19,318800,5 MAN,28,591849,-2 UTHR,18,1006633,-3 GLIBA,36,1640542,0 Average,25.25,889456,0 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 25.25 hedge funds with bullish positions and the average amount invested in these stocks was $889 million. That figure was $934 million in WIX's case. GCI Liberty, Inc. (NASDAQ:GLIBA) is the most popular stock in this table. On the other hand United Therapeutics Corporation (NASDAQ:UTHR) is the least popular one with only 18 bullish hedge fund positions. Wix.Com Ltd (NASDAQ:WIX) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we'd rather spend our time researching stocks that hedge funds are piling on. In this regard GLIBA might be a better candidate to consider a long position.

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

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