In this article we will check out the progression of hedge fund sentiment towards Worthington Industries, Inc. (NYSE:WOR) and determine whether it is a good investment right now. We at Insider Monkey like to examine what billionaires and hedge funds think of a company before spending days of research on it. Given their 2 and 20 payment structure, hedge funds have more incentives and resources than the average investor. The funds have access to expert networks and get tips from industry insiders. They also employ numerous Ivy League graduates and MBAs. Like everyone else, hedge funds perform miserably at times, but their consensus picks have historically outperformed the market after risk adjustments.
Worthington Industries, Inc. (NYSE:WOR) investors should pay attention to a decrease in support from the world's most elite money managers in recent months. Our calculations also showed that WOR isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks). 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 was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 58 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'll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 36% through May 18th. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
[caption id="attachment_745225" align="aligncenter" width="400"] Noam Gottesman of GLG Partners[/caption]
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, blockchain technology's influence will go beyond online payments. So, we are checking out this futurist's moonshot opportunities in tech stocks. We interview hedge fund managers and ask them about their best ideas. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. For example we are checking out stocks recommended/scorned by legendary Bill Miller. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 in February after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind we're going to take a look at the new hedge fund action surrounding Worthington Industries, Inc. (NYSE:WOR).
How are hedge funds trading Worthington Industries, Inc. (NYSE:WOR)?
At the end of the first quarter, a total of 14 of the hedge funds tracked by Insider Monkey were long this stock, a change of -44% from the fourth quarter of 2019. On the other hand, there were a total of 17 hedge funds with a bullish position in WOR a year ago. So, let's find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Royce & Associates held the most valuable stake in Worthington Industries, Inc. (NYSE:WOR), which was worth $12.3 million at the end of the third quarter. On the second spot was AQR Capital Management which amassed $4.8 million worth of shares. Citadel Investment Group, GLG Partners, and D E Shaw 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 AlphaOne Capital Partners allocated the biggest weight to Worthington Industries, Inc. (NYSE:WOR), around 0.49% of its 13F portfolio. Royce & Associates is also relatively very bullish on the stock, designating 0.17 percent of its 13F equity portfolio to WOR.
Seeing as Worthington Industries, Inc. (NYSE:WOR) has experienced bearish sentiment from hedge fund managers, we can see that there was a specific group of funds that slashed their positions entirely by the end of the first quarter. At the top of the heap, Renaissance Technologies said goodbye to the largest stake of the 750 funds followed by Insider Monkey, valued at close to $4.6 million in stock, and Peter Rathjens, Bruce Clarke and John Campbell's Arrowstreet Capital was right behind this move, as the fund said goodbye to about $3.5 million worth. These bearish behaviors are important to note, as total hedge fund interest fell by 11 funds by the end of the first quarter.
Let's check out hedge fund activity in other stocks - not necessarily in the same industry as Worthington Industries, Inc. (NYSE:WOR) but similarly valued. These stocks are Insmed Incorporated (NASDAQ:INSM), Forward Air Corporation (NASDAQ:FWRD), Builders FirstSource, Inc. (NASDAQ:BLDR), and Shake Shack Inc (NYSE:SHAK). This group of stocks' market values are closest to WOR's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position INSM,20,358370,-5 FWRD,17,78795,-3 BLDR,29,303590,-11 SHAK,22,393753,-3 Average,22,283627,-5.5 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 22 hedge funds with bullish positions and the average amount invested in these stocks was $284 million. That figure was $34 million in WOR's case. Builders FirstSource, Inc. (NASDAQ:BLDR) is the most popular stock in this table. On the other hand Forward Air Corporation (NASDAQ:FWRD) is the least popular one with only 17 bullish hedge fund positions. Compared to these stocks Worthington Industries, Inc. (NYSE:WOR) is even less popular than FWRD. Hedge funds clearly dropped the ball on WOR as the stock delivered strong returns, though hedge funds' consensus picks still generated respectable returns. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 13.3% in 2020 through June 25th and still beat the market by 16.8 percentage points. A small number of hedge funds were also right about betting on WOR as the stock returned 41.8% so far in the second quarter and outperformed the market by an even larger margin.
Disclosure: None. This article was originally published at Insider Monkey.