Is WING A Good Stock To Buy According To Hedge Funds?

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Is Wingstop Inc (NASDAQ:WING) 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 WING a good stock to buy? Wingstop Inc (NASDAQ:WING) has seen an increase in enthusiasm from smart money of late. Wingstop Inc (NASDAQ:WING) was in 32 hedge funds’ portfolios at the end of September. The all time high for this statistic is 28. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. There were 28 hedge funds in our database with WING positions at the end of the second quarter. Our calculations also showed that WING 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).
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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 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 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.

David Siegel of Two Sigma Advisors

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, the House passed a landmark bill decriminalizing marijuana. So, we are checking out this under the radar cannabis stock right now. We go through lists like the 15 best blue chip stocks to buy 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. With all of this in mind let’s take a peek at the key hedge fund action surrounding Wingstop Inc (NASDAQ:WING).

Do Hedge Funds Think WING Is A Good Stock To Buy Now?

Heading into the fourth quarter of 2020, a total of 32 of the hedge funds tracked by Insider Monkey were long this stock, a change of 14% from the previous quarter. The graph below displays the number of hedge funds with bullish position in WING over the last 21 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.

The largest stake in Wingstop Inc (NASDAQ:WING) was held by Renaissance Technologies, which reported holding $147.2 million worth of stock at the end of September. It was followed by Arrowstreet Capital with a $52.7 million position. Other investors bullish on the company included Two Sigma Advisors, GLG Partners, and Millennium Management. In terms of the portfolio weights assigned to each position MIK Capital allocated the biggest weight to Wingstop Inc (NASDAQ:WING), around 3.6% of its 13F portfolio. Weld Capital Management is also relatively very bullish on the stock, designating 0.59 percent of its 13F equity portfolio to WING.

With a general bullishness amongst the heavyweights, key hedge funds were breaking ground themselves. MIK Capital, managed by Kamyar Khajavi, established the biggest position in Wingstop Inc (NASDAQ:WING). MIK Capital had $6.6 million invested in the company at the end of the quarter. Joel Greenblatt’s Gotham Asset Management also initiated a $6 million position during the quarter. The following funds were also among the new WING investors: Jinghua Yan’s TwinBeech Capital, Brad Dunkley and Blair Levinsky’s Waratah Capital Advisors, and Benjamin A. Smith’s Laurion Capital Management.

Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Wingstop Inc (NASDAQ:WING) but similarly valued. These stocks are Medallia, Inc. (NYSE:MDLA), IDACORP Inc (NYSE:IDA), LendingTree, Inc (NASDAQ:TREE), Cullen/Frost Bankers, Inc. (NYSE:CFR), Cyberark Software Ltd (NASDAQ:CYBR), Premier Inc (NASDAQ:PINC), and Xerox Holdings Corporation (NYSE:XRX). This group of stocks’ market values match WING’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
MDLA 24 382834 6
IDA 31 227986 9
TREE 20 68556 5
CFR 19 39453 6
CYBR 25 234808 8
PINC 10 160511 -5
XRX 28 828565 -7
Average 22.4 277530 3.1

View table here if you experience formatting issues.

As you can see these stocks had an average of 22.4 hedge funds with bullish positions and the average amount invested in these stocks was $278 million. That figure was $365 million in WING’s case. IDACORP Inc (NYSE:IDA) is the most popular stock in this table. On the other hand Premier Inc (NASDAQ:PINC) is the least popular one with only 10 bullish hedge fund positions. Compared to these stocks Wingstop Inc (NASDAQ:WING) is more popular among hedge funds. Our overall hedge fund sentiment score for WING is 89. 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. 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 33.3% in 2020 through December 18th and still beat the market by 16.4 percentage points. Unfortunately WING wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on WING were disappointed as the stock returned 9.9% since the end of the third quarter (through 12/18) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 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.