Should I Avoid ContextLogic Inc. (WISH)?

·6 min read

A whopping number of 13F filings filed with U.S. Securities and Exchange Commission has been processed by Insider Monkey so that individual investors can look at the overall hedge fund sentiment towards the stocks included in their watchlists. These freshly-submitted public filings disclose money managers’ equity positions as of the end of the three-month period that ended June 30th, so let’s proceed with the discussion of the hedge fund sentiment on ContextLogic Inc. (NASDAQ:WISH).

Is ContextLogic Inc. (NASDAQ:WISH) a splendid stock to buy now? Hedge funds were turning less bullish. The number of bullish hedge fund bets decreased by 4 in recent months. ContextLogic Inc. (NASDAQ:WISH) was in 21 hedge funds' portfolios at the end of the second quarter of 2021. The all time high for this statistic is 25. Our calculations also showed that WISH isn't among the 30 most popular stocks among hedge funds (click for Q2 rankings). There were 25 hedge funds in our database with WISH positions at the end of the first quarter.

In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey's monthly stock picks returned 185.4% since March 2017 and outperformed the S&P 500 ETFs by more than 79 percentage points (see the details here). That's why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

Matthew Hulsizer PEAK6 Capital
Matthew Hulsizer PEAK6 Capital

Matthew Hulsizer of PEAK6 Capital

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. We go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. 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 homepage. With all of this in mind let's view the latest hedge fund action surrounding ContextLogic Inc. (NASDAQ:WISH).

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

Heading into the third quarter of 2021, a total of 21 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -16% from one quarter earlier. On the other hand, there were a total of 1 hedge funds with a bullish position in WISH a year ago. With hedgies' sentiment swirling, there exists a few key hedge fund managers who were increasing their holdings meaningfully (or already accumulated large positions).

Is WISH A Good Stock To Buy?
Is WISH A Good Stock To Buy?

When looking at the institutional investors followed by Insider Monkey, Citadel Investment Group, managed by Ken Griffin, holds the number one position in ContextLogic Inc. (NASDAQ:WISH). Citadel Investment Group has a $38.4 million call position in the stock, comprising less than 0.1%% of its 13F portfolio. On Citadel Investment Group's heels is Islet Management, led by Joseph Samuels, holding a $29.6 million call position; 0.8% of its 13F portfolio is allocated to the stock. Some other professional money managers with similar optimism consist of Ken Griffin's Citadel Investment Group, Jonathan Soros's JS Capital and Frank Fu's CaaS Capital. In terms of the portfolio weights assigned to each position Proem Advisors allocated the biggest weight to ContextLogic Inc. (NASDAQ:WISH), around 4.08% of its 13F portfolio. Hidden Lake Asset Management is also relatively very bullish on the stock, earmarking 1.91 percent of its 13F equity portfolio to WISH.

Seeing as ContextLogic Inc. (NASDAQ:WISH) has experienced falling interest from the smart money, it's safe to say that there were a few money managers that decided to sell off their entire stakes heading into Q3. Intriguingly, Dan Loeb's Third Point sold off the largest stake of the 750 funds followed by Insider Monkey, comprising about $59.6 million in stock. David Goel and Paul Ferri's fund, Matrix Capital Management, also said goodbye to its stock, about $15.8 million worth. These transactions are important to note, as total hedge fund interest dropped by 4 funds heading into Q3.

Let's now take a look at hedge fund activity in other stocks - not necessarily in the same industry as ContextLogic Inc. (NASDAQ:WISH) but similarly valued. These stocks are Kilroy Realty Corp (NYSE:KRC), Nutanix, Inc. (NASDAQ:NTNX), Tilray, Inc. (NASDAQ:TLRY), OneMain Holdings Inc (NYSE:OMF), Beam Therapeutics Inc. (NASDAQ:BEAM), United Therapeutics Corporation (NASDAQ:UTHR), and YETI Holdings, Inc. (NYSE:YETI). This group of stocks' market valuations resemble WISH's market valuation.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position KRC,26,241032,-1 NTNX,29,1165939,0 TLRY,17,94865,-4 OMF,41,994909,-2 BEAM,21,1771681,3 UTHR,45,2334119,3 YETI,34,282409,4 Average,30.4,983565,0.4 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 30.4 hedge funds with bullish positions and the average amount invested in these stocks was $984 million. That figure was $140 million in WISH's case. United Therapeutics Corporation (NASDAQ:UTHR) is the most popular stock in this table. On the other hand Tilray, Inc. (NASDAQ:TLRY) is the least popular one with only 17 bullish hedge fund positions. ContextLogic Inc. (NASDAQ:WISH) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for WISH is 33.3. 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. This is a slightly negative signal and we'd rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 24% in 2021 through October 22nd and surpassed the market again by 1.6 percentage points. Unfortunately WISH wasn't nearly as popular as these 5 stocks (hedge fund sentiment was quite bearish); WISH investors were disappointed as the stock returned -60.5% since the end of June (through 10/22) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2021.

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

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