At the end of February we announced the arrival of the first US recession since 2009 and we predicted 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 Weyerhaeuser Co. (NYSE:WY).
Weyerhaeuser Co. (NYSE:WY) was in 35 hedge funds' portfolios at the end of March. WY shareholders have witnessed an increase in activity from the world's largest hedge funds recently. There were 30 hedge funds in our database with WY holdings at the end of the previous quarter. Our calculations also showed that WY 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 has shown that hedge funds' small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by 51 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 underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.
[caption id="attachment_758450" align="aligncenter" width="400"] Martin Whitman of Third Avenue Management[/caption]
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, 2020's unprecedented market conditions provide us with the highest number of trading opportunities in a decade. So we are checking out trades like this one. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind let's analyze the fresh hedge fund action regarding Weyerhaeuser Co. (NYSE:WY).
What does smart money think about Weyerhaeuser Co. (NYSE:WY)?
At the end of the first quarter, a total of 35 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 17% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards WY over the last 18 quarters. With hedge funds' sentiment swirling, there exists an "upper tier" of notable hedge fund managers who were boosting their stakes meaningfully (or already accumulated large positions).
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Ken Griffin's Citadel Investment Group has the biggest position in Weyerhaeuser Co. (NYSE:WY), worth close to $47.5 million, comprising less than 0.1%% of its total 13F portfolio. On Citadel Investment Group's heels is Third Avenue Management, led by Martin Whitman, holding a $31.1 million position; the fund has 4.6% of its 13F portfolio invested in the stock. Other hedge funds and institutional investors with similar optimism comprise Renaissance Technologies, Peter Rathjens, Bruce Clarke and John Campbell's Arrowstreet Capital and Joel Greenblatt's Gotham Asset Management. In terms of the portfolio weights assigned to each position Third Avenue Management allocated the biggest weight to Weyerhaeuser Co. (NYSE:WY), around 4.61% of its 13F portfolio. Bourgeon Capital is also relatively very bullish on the stock, earmarking 2.16 percent of its 13F equity portfolio to WY.
As one would reasonably expect, specific money managers were leading the bulls' herd. Arrowstreet Capital, managed by Peter Rathjens, Bruce Clarke and John Campbell, established the most outsized position in Weyerhaeuser Co. (NYSE:WY). Arrowstreet Capital had $20.7 million invested in the company at the end of the quarter. Greg Poole's Echo Street Capital Management also initiated a $3.8 million position during the quarter. The other funds with brand new WY positions are Ken Heebner's Capital Growth Management, Steve Cohen's Point72 Asset Management, and D. E. Shaw's D E Shaw.
Let's check out hedge fund activity in other stocks similar to Weyerhaeuser Co. (NYSE:WY). We will take a look at Hartford Financial Services Group Inc (NYSE:HIG), CBRE Group, Inc. (NYSE:CBRE), MarketAxess Holdings Inc. (NASDAQ:MKTX), and Ameriprise Financial, Inc. (NYSE:AMP). This group of stocks' market values are similar to WY's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position HIG,37,708354,3 CBRE,33,1142791,3 MKTX,27,711821,0 AMP,26,605759,-11 Average,30.75,792181,-1.25 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 30.75 hedge funds with bullish positions and the average amount invested in these stocks was $792 million. That figure was $196 million in WY's case. Hartford Financial Services Group Inc (NYSE:HIG) is the most popular stock in this table. On the other hand Ameriprise Financial, Inc. (NYSE:AMP) is the least popular one with only 26 bullish hedge fund positions. Weyerhaeuser Co. (NYSE:WY) is not the most popular stock in this group but hedge fund interest is still above average. 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 8.3% in 2020 through the end of May but still beat the market by 13.2 percentage points. Hedge funds were also right about betting on WY, though not to the same extent, as the stock returned 19.1% during the first two months of the second quarter and outperformed the market as well.
Disclosure: None. This article was originally published at Insider Monkey.