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Hedge Funds Are Coming Back To WestRock Company (WRK)

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Last year we predicted the arrival of the first US recession since 2009 and we told in advance that the market will decline by at least 20% in (Recession is Imminent: We Need A Travel Ban NOW). In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. In this article, we will take a closer look at hedge fund sentiment towards WestRock Company (NYSE:WRK).

Is WestRock Company (NYSE:WRK) going to take off soon? The smart money was becoming hopeful. The number of bullish hedge fund positions advanced by 5 in recent months. WestRock Company (NYSE:WRK) was in 32 hedge funds' portfolios at the end of June. The all time high for this statistic is 43. Our calculations also showed that WRK isn't among the 30 most popular stocks among hedge funds (click for Q2 rankings). There were 27 hedge funds in our database with WRK positions at the end of the first quarter.

In the 21st century investor’s toolkit there are several formulas investors use to value their stock investments. Some of the most useful formulas are hedge fund and insider trading indicators. Our researchers have shown that, historically, those who follow the top picks of the best money managers can outpace the market by a healthy amount (see the details here). Also, our monthly newsletter's portfolio of long stock picks returned 185.4% since March 2017 (through August 2021) and beat the S&P 500 Index by more than 79 percentage points. You can download a sample issue of this newsletter on our website.

Ryan Tolkin, CIO of Schonfeld Strategic Advisors

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 recent hedge fund action surrounding WestRock Company (NYSE:WRK).

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

At the end of June, a total of 32 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 19% from the previous quarter. On the other hand, there were a total of 32 hedge funds with a bullish position in WRK a year ago. With the smart money's sentiment swirling, there exists an "upper tier" of noteworthy hedge fund managers who were increasing their holdings considerably (or already accumulated large positions).

The largest stake in WestRock Company (NYSE:WRK) was held by Impax Asset Management, which reported holding $227 million worth of stock at the end of June. It was followed by Atlantic Investment Management with a $59.5 million position. Other investors bullish on the company included AQR Capital Management, Lakewood Capital Management, and Sandbar Asset Management. In terms of the portfolio weights assigned to each position Atlantic Investment Management allocated the biggest weight to WestRock Company (NYSE:WRK), around 18.68% of its 13F portfolio. Sandbar Asset Management is also relatively very bullish on the stock, dishing out 5.09 percent of its 13F equity portfolio to WRK.

As industrywide interest jumped, some big names have been driving this bullishness. Moore Global Investments, managed by Louis Bacon, initiated the most outsized position in WestRock Company (NYSE:WRK). Moore Global Investments had $5.9 million invested in the company at the end of the quarter. D. E. Shaw's D E Shaw also initiated a $2.2 million position during the quarter. The other funds with brand new WRK positions are Karim Abbadi and Edward McBride's Centiva Capital, Ryan Tolkin (CIO)'s Schonfeld Strategic Advisors, and Ray Dalio's Bridgewater Associates.

Let's go over hedge fund activity in other stocks - not necessarily in the same industry as WestRock Company (NYSE:WRK) but similarly valued. These stocks are GoodRx Holdings, Inc. (NASDAQ:GDRX), Wynn Resorts, Limited (NASDAQ:WYNN), ABIOMED, Inc. (NASDAQ:ABMD), Oak Street Health, Inc. (NYSE:OSH), Aluminum Corp. of China Limited (NYSE:ACH), The J.M. Smucker Company (NYSE:SJM), and Continental Resources, Inc. (NYSE:CLR). All of these stocks' market caps resemble WRK's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position GDRX,28,635923,4 WYNN,37,712498,-12 ABMD,24,899188,-2 OSH,33,561397,2 ACH,4,8000,1 SJM,34,580514,1 CLR,23,172410,0 Average,26.1,509990,-0.9 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 26.1 hedge funds with bullish positions and the average amount invested in these stocks was $510 million. That figure was $572 million in WRK's case. Wynn Resorts, Limited (NASDAQ:WYNN) is the most popular stock in this table. On the other hand Aluminum Corp. of China Limited (NYSE:ACH) is the least popular one with only 4 bullish hedge fund positions. WestRock Company (NYSE:WRK) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for WRK is 74.7. 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 positive signal but 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 24.9% in 2021 through October 15th and beat the market again by 4.5 percentage points. Unfortunately WRK wasn't nearly as popular as these 5 stocks and hedge funds that were betting on WRK were disappointed as the stock returned -12.1% since the end of June (through 10/15) 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 many of these stocks already outperformed the market since 2019.

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