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We hate to say this but, we told you so. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW and predicted a US recession when the S&P 500 Index was trading at the 3150 level. We also told you to short the market and buy long-term Treasury bonds. Our article also called for a total international travel ban. While we were warning you, President Trump minimized the threat and failed to act promptly. As a result of his inaction, we will now experience a deeper recession (10 coronavirus predictions).
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. The financial regulations require hedge funds and wealthy investors that exceeded the $100 million equity holdings threshold to file a report that shows their positions at the end of every quarter. Even though it isn't the intention, these filings to a certain extent level the playing field for ordinary investors. The latest round of 13F filings disclosed the funds' positions on December 31st. We at Insider Monkey have made an extensive database of more than 835 of those established hedge funds and famous value investors' filings. In this article, we analyze how these elite funds and prominent investors traded Whirlpool Corporation (NYSE:WHR) based on those filings.
Whirlpool Corporation (NYSE:WHR) shareholders have witnessed a decrease in hedge fund sentiment recently. WHR was in 28 hedge funds' portfolios at the end of the fourth quarter of 2019. There were 31 hedge funds in our database with WHR holdings at the end of the previous quarter. Our calculations also showed that WHR isn't among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of this article for Q3 rankings).
To most shareholders, hedge funds are assumed to be underperforming, outdated investment vehicles of the past. While there are greater than 8000 funds in operation at the moment, Our researchers hone in on the elite of this group, about 850 funds. These hedge fund managers command the majority of all hedge funds' total asset base, and by paying attention to their top stock picks, Insider Monkey has uncovered a few investment strategies that have historically exceeded the broader indices. Insider Monkey's flagship short hedge fund strategy beat the S&P 500 short ETFs by around 20 percentage points annually since its inception in March 2017. Our portfolio of short stocks lost 35.3% since February 2017 (through March 3rd) even though the market was up more than 35% during the same period. We just shared a list of 7 short targets in our latest quarterly update .
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Paul Marshall of Marshall Wace[/caption]
We leave no stone unturned when looking for the next great investment idea. For example we recently identified a stock that trades 25% below the net cash on its balance sheet. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences, and go through short-term trade recommendations like this one. We even check out the recommendations of services with hard to believe track records. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic's significance before most investors. With all of this in mind let's take a peek at the new hedge fund action encompassing Whirlpool Corporation (NYSE:WHR).
How have hedgies been trading Whirlpool Corporation (NYSE:WHR)?
At the end of the fourth quarter, a total of 28 of the hedge funds tracked by Insider Monkey were long this stock, a change of -10% from the previous quarter. By comparison, 20 hedge funds held shares or bullish call options in WHR a year ago. So, let's examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Greenhaven Associates was the largest shareholder of Whirlpool Corporation (NYSE:WHR), with a stake worth $406.9 million reported as of the end of September. Trailing Greenhaven Associates was Lyrical Asset Management, which amassed a stake valued at $259.5 million. AQR Capital Management, Arrowstreet Capital, and Marshall Wace LLP 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 Greenhaven Associates allocated the biggest weight to Whirlpool Corporation (NYSE:WHR), around 9.08% of its 13F portfolio. Lyrical Asset Management is also relatively very bullish on the stock, designating 3.53 percent of its 13F equity portfolio to WHR.
Seeing as Whirlpool Corporation (NYSE:WHR) has faced declining sentiment from the smart money, it's easy to see that there were a few funds that decided to sell off their entire stakes in the third quarter. At the top of the heap, Ken Heebner's Capital Growth Management cut the biggest stake of the "upper crust" of funds tracked by Insider Monkey, valued at an estimated $4.8 million in call options, and Benjamin A. Smith's Laurion Capital Management was right behind this move, as the fund cut about $1.6 million worth. These bearish behaviors are interesting, as total hedge fund interest fell by 3 funds in the third quarter.
Let's go over hedge fund activity in other stocks similar to Whirlpool Corporation (NYSE:WHR). These stocks are Tata Motors Limited (NYSE:TTM), Snap-on Incorporated (NYSE:SNA), Kirkland Lake Gold Ltd. (NYSE:KL), and AngloGold Ashanti Limited (NYSE:AU). This group of stocks' market caps are similar to WHR's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position TTM,11,148219,4 SNA,27,557734,0 KL,24,508654,8 AU,17,542302,-2 Average,19.75,439227,2.5 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 19.75 hedge funds with bullish positions and the average amount invested in these stocks was $439 million. That figure was $1045 million in WHR's case. Snap-on Incorporated (NYSE:SNA) is the most popular stock in this table. On the other hand Tata Motors Limited (NYSE:TTM) is the least popular one with only 11 bullish hedge fund positions. Compared to these stocks Whirlpool Corporation (NYSE:WHR) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks lost 22.3% in 2020 through March 16th and still beat the market by 3.2 percentage points. Unfortunately WHR wasn't nearly as popular as these 20 stocks and hedge funds that were betting on WHR were disappointed as the stock returned -36.5% during the first two and a half months of 2020 (through March 16th) 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 most of these stocks already outperformed the market in Q1.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.