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"The global economic environment is very favorable for investors. Economies are generally strong, but not too strong. Employment levels are among the strongest for many decades. Interest rates are paused at very low levels, and the risk of significant increases in the medium term seems low. Financing for transactions is freely available to good borrowers, but not in major excess. Covenants are lighter than they were five years ago, but the extreme excesses seen in the past do not seem prevalent yet today. Despite this apparent ‘goldilocks’ market environment, we continue to worry about a world where politics are polarized almost everywhere, interest rates are low globally, and equity valuations are at their peak," are the words of Brookfield Asset Management. Brookfield was right about politics as stocks experienced their second worst May since the 1960s due to escalation of trade disputes. We pay attention to what hedge funds are doing in a particular stock before considering a potential investment because it works for us. So let’s take a glance at the smart money sentiment towards Whirlpool Corporation (NYSE:WHR) and see how it was affected.
Whirlpool Corporation (NYSE:WHR) was in 18 hedge funds' portfolios at the end of March. WHR investors should be aware of a decrease in activity from the world's largest hedge funds lately. There were 20 hedge funds in our database with WHR positions at the end of the previous quarter. Our calculations also showed that WHR 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 take a look at the recent hedge fund action surrounding Whirlpool Corporation (NYSE:WHR).
How are hedge funds trading Whirlpool Corporation (NYSE:WHR)?
At Q1's end, a total of 18 of the hedge funds tracked by Insider Monkey were long this stock, a change of -10% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in WHR over the last 15 quarters. So, let's check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
When looking at the institutional investors followed by Insider Monkey, Edgar Wachenheim's Greenhaven Associates has the largest position in Whirlpool Corporation (NYSE:WHR), worth close to $376.4 million, accounting for 6.7% of its total 13F portfolio. The second largest stake is held by Millennium Management, managed by Israel Englander, which holds a $43.6 million position; the fund has 0.1% of its 13F portfolio invested in the stock. Some other hedge funds and institutional investors that are bullish include Tom Gayner's Markel Gayner Asset Management, John Overdeck and David Siegel's Two Sigma Advisors and Ken Griffin's Citadel Investment Group.
Due to the fact that Whirlpool Corporation (NYSE:WHR) has faced declining sentiment from the entirety of the hedge funds we track, it's safe to say that there is a sect of hedge funds that decided to sell off their full holdings heading into Q3. It's worth mentioning that Richard Barrera's Roystone Capital Partners sold off the largest investment of the 700 funds monitored by Insider Monkey, totaling close to $28.9 million in stock. Ray Dalio's fund, Bridgewater Associates, also sold off its stock, about $23.8 million worth. These transactions are intriguing to say the least, as aggregate hedge fund interest was cut by 2 funds heading into Q3.
Let's go over hedge fund activity in other stocks - not necessarily in the same industry as Whirlpool Corporation (NYSE:WHR) but similarly valued. We will take a look at Zions Bancorporation (NASDAQ:ZION), Woori Financial Group Inc. (NYSE:WF), ON Semiconductor Corporation (NASDAQ:ON), and HollyFrontier Corporation (NYSE:HFC). All of these stocks' market caps are closest to WHR's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position ZION,44,631442,2 WF,1,997,-1 ON,39,660556,10 HFC,25,827449,0 Average,27.25,530111,2.75 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 27.25 hedge funds with bullish positions and the average amount invested in these stocks was $530 million. That figure was $548 million in WHR's case. Zions Bancorporation (NASDAQ:ZION) is the most popular stock in this table. On the other hand Woori Financial Group Inc. (NYSE:WF) is the least popular one with only 1 bullish hedge fund positions. Whirlpool Corporation (NYSE:WHR) is not the least popular stock in this group but hedge fund interest is still below average. Our calculations showed that top 20 most popular stocks among hedge funds returned 6.2% in Q2 through June 19th and outperformed the S&P 500 ETF (SPY) by nearly 3 percentage points. A small number of hedge funds were also right about betting on WHR as the stock returned 7.8% during the same time frame and outperformed the market by an even larger margin.
Disclosure: None. This article was originally published at Insider Monkey.
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