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Hedge Funds Are Nibbling On Newell Brands Inc. (NWL)

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  • NWL

How do you pick the next stock to invest in? One way would be to spend days of research browsing through thousands of publicly traded companies. However, an easier way is to look at the stocks that smart money investors are collectively bullish on. Hedge funds and other institutional investors usually invest large amounts of capital and have to conduct due diligence while choosing their next pick. They don't always get it right, but, on average, their stock picks historically generated strong returns after adjusting for known risk factors. With this in mind, let’s take a look at the recent hedge fund activity surrounding Newell Brands Inc. (NASDAQ:NWL).

Newell Brands Inc. (NASDAQ:NWL) shareholders have witnessed an increase in hedge fund interest lately. Newell Brands Inc. (NYSE:NWL) was in 25 hedge funds' portfolios at the end of June. The all time high for this statistic is 51. There were 24 hedge funds in our database with NWL holdings at the end of March. Our calculations also showed that NWL isn't among the 30 most popular stocks among hedge funds (click for Q2 rankings).

To the average investor there are several methods stock market investors have at their disposal to evaluate publicly traded companies. Some of the most innovative methods are hedge fund and insider trading activity. Our experts have shown that, historically, those who follow the best picks of the elite hedge fund managers can outpace their index-focused peers by a superb 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.

Carl Icahn - Icahn Capital Lp
Carl Icahn - Icahn Capital Lp

Carl Icahn of Icahn 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 check out the latest hedge fund action regarding Newell Brands Inc. (NASDAQ:NWL).

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

At the end of June, a total of 25 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 4% from the first quarter of 2020. By comparison, 33 hedge funds held shares or bullish call options in NWL a year ago. With hedgies' capital changing hands, there exists a few key hedge fund managers who were boosting their holdings considerably (or already accumulated large positions).

The largest stake in Newell Brands Inc. (NASDAQ:NWL) was held by Icahn Capital LP, which reported holding $1200.6 million worth of stock at the end of June. It was followed by Pzena Investment Management with a $685.7 million position. Other investors bullish on the company included Arrowstreet Capital, Millennium Management, and D E Shaw. In terms of the portfolio weights assigned to each position Icahn Capital LP allocated the biggest weight to Newell Brands Inc. (NASDAQ:NWL), around 4.94% of its 13F portfolio. Southport Management is also relatively very bullish on the stock, designating 4.18 percent of its 13F equity portfolio to NWL.

Consequently, some big names were leading the bulls' herd. Renaissance Technologies, established the largest position in Newell Brands Inc. (NASDAQ:NWL). Renaissance Technologies had $4.2 million invested in the company at the end of the quarter. Michael Gelband's ExodusPoint Capital also made a $1.1 million investment in the stock during the quarter. The other funds with new positions in the stock are Greg Eisner's Engineers Gate Manager, Jinghua Yan's TwinBeech Capital, and Donald Sussman's Paloma Partners.

Let's now take a look at hedge fund activity in other stocks - not necessarily in the same industry as Newell Brands Inc. (NASDAQ:NWL) but similarly valued. We will take a look at Molson Coors Beverage Company (NYSE:TAP), BorgWarner Inc. (NYSE:BWA), Zynga Inc (NASDAQ:ZNGA), A. O. Smith Corporation (NYSE:AOS), AMERCO (NASDAQ:UHAL), Cable One Inc (NYSE:CABO), and Westlake Chemical Corporation (NYSE:WLK). This group of stocks' market valuations match NWL's market valuation.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position TAP,39,519321,5 BWA,27,567604,0 ZNGA,49,1270452,2 AOS,26,584108,2 UHAL,21,817145,-2 CABO,20,703195,-3 WLK,35,269784,9 Average,31,675944,1.9 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 31 hedge funds with bullish positions and the average amount invested in these stocks was $676 million. That figure was $2028 million in NWL's case. Zynga Inc (NASDAQ:ZNGA) is the most popular stock in this table. On the other hand Cable One Inc (NYSE:CABO) is the least popular one with only 20 bullish hedge fund positions. Newell Brands Inc. (NASDAQ:NWL) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for NWL is 29.3. 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 NWL wasn't nearly as popular as these 5 stocks (hedge fund sentiment was quite bearish); NWL investors were disappointed as the stock returned -16.8% 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.