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Is AWI Stock A Buy or Sell?

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Debasis Saha
·5 min read
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In this article we will analyze whether Armstrong World Industries, Inc. (NYSE:AWI) is a good investment right now by following the lead of some of the best investors in the world and piggybacking their ideas. There's no better way to get these firms' immense resources and analytical capabilities working for us than to follow their lead into their best ideas. While not all of these picks will be winners, our research shows that these picks historically outperformed the market by double digits annually.

Is AWI stock a buy? Prominent investors were becoming hopeful. The number of bullish hedge fund bets inched up by 1 in recent months. Armstrong World Industries, Inc. (NYSE:AWI) was in 31 hedge funds' portfolios at the end of December. The all time high for this statistic is 37. Our calculations also showed that AWI isn't among the 30 most popular stocks among hedge funds (click for Q4 rankings).

To the average investor there are several tools market participants have at their disposal to value their stock investments. A couple of the most underrated tools are hedge fund and insider trading activity. Our experts have shown that, historically, those who follow the top picks of the elite investment managers can outperform the broader indices by a healthy margin (see the details here).

Jeffrey Gates Gates Capital
Jeffrey Gates Gates Capital

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, we heard that billionaire Peter Thiel is backing this biotech stock. So, we are taking a closer look at this space. We go through lists like the 10 best biotech stocks under $10 to identify the next stock with 10x upside potential. 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. Now we're going to analyze the new hedge fund action regarding Armstrong World Industries, Inc. (NYSE:AWI).

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

Heading into the first quarter of 2021, a total of 31 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 3% from the previous quarter. The graph below displays the number of hedge funds with bullish position in AWI over the last 22 quarters. With hedge funds' sentiment swirling, there exists a few key hedge fund managers who were upping their stakes meaningfully (or already accumulated large positions).

Is AWI A Good Stock To Buy?
Is AWI A Good Stock To Buy?

More specifically, Gates Capital Management was the largest shareholder of Armstrong World Industries, Inc. (NYSE:AWI), with a stake worth $125.5 million reported as of the end of December. Trailing Gates Capital Management was Cantillon Capital Management, which amassed a stake valued at $92.6 million. MIG Capital, Southpoint Capital Advisors, and Millennium Management were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Owls Nest Partners allocated the biggest weight to Armstrong World Industries, Inc. (NYSE:AWI), around 7.89% of its 13F portfolio. MIG Capital is also relatively very bullish on the stock, earmarking 5.76 percent of its 13F equity portfolio to AWI.

As one would reasonably expect, some big names have been driving this bullishness. Southpoint Capital Advisors, managed by John Smith Clark, assembled the largest position in Armstrong World Industries, Inc. (NYSE:AWI). Southpoint Capital Advisors had $44.6 million invested in the company at the end of the quarter. Philip Timon's Owls Nest Partners also initiated a $13 million position during the quarter. The other funds with new positions in the stock are James Dinan's York Capital Management, Charles Davidson and Joseph Jacobs's Wexford Capital, and Qing Li's Sciencast Management.

Let's go over hedge fund activity in other stocks - not necessarily in the same industry as Armstrong World Industries, Inc. (NYSE:AWI) but similarly valued. These stocks are The Brink's Company (NYSE:BCO), ShockWave Medical, Inc. (NASDAQ:SWAV), Cohen & Steers, Inc. (NYSE:CNS), DouYu International Holdings Limited (NASDAQ:DOYU), Allogene Therapeutics, Inc. (NASDAQ:ALLO), CIT Group Inc. (NYSE:CIT), and SpringWorks Therapeutics, Inc. (NASDAQ:SWTX). All of these stocks' market caps resemble AWI's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position BCO,26,413476,-2 SWAV,22,168832,6 CNS,15,76253,-7 DOYU,27,237774,4 ALLO,18,184497,-3 CIT,31,652555,4 SWTX,22,1254834,6 Average,23,426889,1.1 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 23 hedge funds with bullish positions and the average amount invested in these stocks was $427 million. That figure was $458 million in AWI's case. CIT Group Inc. (NYSE:CIT) is the most popular stock in this table. On the other hand Cohen & Steers, Inc. (NYSE:CNS) is the least popular one with only 15 bullish hedge fund positions. Armstrong World Industries, Inc. (NYSE:AWI) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for AWI is 81.1. 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 30 most popular stocks among hedge funds returned 81.2% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 26 percentage points. These stocks gained 12.2% in 2021 through April 12th and still beat the market by 1.5 percentage points. Hedge funds were also right about betting on AWI as the stock returned 27.1% since the end of Q4 (through 4/12) and outperformed the market. Hedge funds were rewarded for their relative bullishness.

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

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