Hedge Funds and other institutional investors have just completed filing their 13Fs with the Securities and Exchange Commission, revealing their equity portfolios as of the end of March. At Insider Monkey, we follow nearly 750 active hedge funds and notable investors and by analyzing their 13F filings, we can determine the stocks that they are collectively bullish on. One of their picks is Stanley Black & Decker, Inc. (NYSE:SWK), so let’s take a closer look at the sentiment that surrounds it in the current quarter.
Stanley Black & Decker, Inc. (NYSE:SWK) was in 31 hedge funds' portfolios at the end of the first quarter of 2019. SWK investors should be aware of a decrease in hedge fund interest lately. There were 35 hedge funds in our database with SWK holdings at the end of the previous quarter. Our calculations also showed that SWK isn't among the 30 most popular stocks among hedge funds.
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 flagship best performing hedge funds strategy returned 25.8% year to date (through May 30th) and outperformed the market even though it draws its stock picks among small-cap stocks. This strategy also outperformed the market by 40 percentage points since its inception (see the details here). That's why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
Let's check out the fresh hedge fund action regarding Stanley Black & Decker, Inc. (NYSE:SWK).
Hedge fund activity in Stanley Black & Decker, Inc. (NYSE:SWK)
At Q1's end, a total of 31 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -11% from the fourth quarter of 2018. By comparison, 32 hedge funds held shares or bullish call options in SWK a year ago. With hedgies' sentiment swirling, there exists a select group of noteworthy hedge fund managers who were boosting their holdings substantially (or already accumulated large positions).
Among these funds, Pzena Investment Management held the most valuable stake in Stanley Black & Decker, Inc. (NYSE:SWK), which was worth $330 million at the end of the first quarter. On the second spot was Citadel Investment Group which amassed $256.1 million worth of shares. Moreover, Ariel Investments, Holocene Advisors, and Point State Capital were also bullish on Stanley Black & Decker, Inc. (NYSE:SWK), allocating a large percentage of their portfolios to this stock.
Since Stanley Black & Decker, Inc. (NYSE:SWK) has experienced a decline in interest from hedge fund managers, it's safe to say that there was a specific group of fund managers that slashed their positions entirely in the third quarter. It's worth mentioning that Patrick Degorce's Theleme Partners sold off the largest stake of all the hedgies watched by Insider Monkey, comprising about $74.8 million in call options. Gregg Moskowitz's fund, Interval Partners, also dropped its call options, about $67.1 million worth. These transactions are important to note, as aggregate hedge fund interest was cut by 4 funds in the third quarter.
Let's now take a look at hedge fund activity in other stocks - not necessarily in the same industry as Stanley Black & Decker, Inc. (NYSE:SWK) but similarly valued. These stocks are ArcelorMittal (NYSE:MT), The Clorox Company (NYSE:CLX), Aptiv PLC (NYSE:APTV), and TAL Education Group (NYSE:TAL). This group of stocks' market valuations are closest to SWK's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position MT,12,222442,-1 CLX,29,1070055,1 APTV,33,791655,-11 TAL,25,1055553,1 Average,24.75,784926,-2.5 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 24.75 hedge funds with bullish positions and the average amount invested in these stocks was $785 million. That figure was $1034 million in SWK's case. Aptiv PLC (NYSE:APTV) is the most popular stock in this table. On the other hand ArcelorMittal (NYSE:MT) is the least popular one with only 12 bullish hedge fund positions. Stanley Black & Decker, Inc. (NYSE:SWK) is not the most popular stock in this group but hedge fund interest is still above average. 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 20 most popular stocks among hedge funds returned 1.9% in Q2 through May 30th and outperformed the S&P 500 ETF (SPY) by more than 3 percentage points. Unfortunately SWK wasn't nearly as popular as these 20 stocks and hedge funds that were betting on SWK were disappointed as the stock returned -3.8% during the same period and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as 13 of these stocks already outperformed the market so far in Q2.
Disclosure: None. This article was originally published at Insider Monkey.