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The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. Insider Monkey finished processing 817 13F filings submitted by hedge funds and prominent investors. These filings show these funds' portfolio positions as of September 30th, 2020. What do these smart investors think about Illinois Tool Works Inc. (NYSE:ITW)?
Is ITW a good stock to buy now? Illinois Tool Works Inc. (NYSE:ITW) investors should pay attention to an increase in hedge fund sentiment lately. Illinois Tool Works Inc. (NYSE:ITW) was in 39 hedge funds' portfolios at the end of the third quarter of 2020. The all time high for this statistic is 38. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. There were 35 hedge funds in our database with ITW positions at the end of the second quarter. Our calculations also showed that ITW isn't among the 30 most popular stocks among hedge funds (click for Q3 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.
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 monthly stock picks returned 113% since March 2017 and outperformed the S&P 500 ETFs by more than 66 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That's why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
Bruce Kovner of Caxton Associates LP
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, the House passed a landmark bill decriminalizing marijuana. So, we are checking out this under the radar cannabis stock right now. We go through lists like the 15 best blue chip stocks to buy to pick the best large-cap stocks to buy. 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 website. Now let's review the recent hedge fund action encompassing Illinois Tool Works Inc. (NYSE:ITW).
Do Hedge Funds Think ITW Is A Good Stock To Buy Now?
At the end of the third quarter, a total of 39 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 11% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards ITW over the last 21 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.
Of the funds tracked by Insider Monkey, Cliff Asness's AQR Capital Management has the biggest position in Illinois Tool Works Inc. (NYSE:ITW), worth close to $156.9 million, amounting to 0.3% of its total 13F portfolio. The second largest stake is held by Citadel Investment Group, managed by Ken Griffin, which holds a $87.7 million position; less than 0.1%% of its 13F portfolio is allocated to the company. Some other hedge funds and institutional investors that are bullish consist of Peter Rathjens, Bruce Clarke and John Campbell's Arrowstreet Capital, Tom Gayner's Markel Gayner Asset Management and Ken Griffin's Citadel Investment Group. In terms of the portfolio weights assigned to each position Jade Capital Advisors allocated the biggest weight to Illinois Tool Works Inc. (NYSE:ITW), around 2.44% of its 13F portfolio. Arjuna Capital is also relatively very bullish on the stock, designating 2.03 percent of its 13F equity portfolio to ITW.
With a general bullishness amongst the heavyweights, key hedge funds were leading the bulls' herd. Adage Capital Management, managed by Phill Gross and Robert Atchinson, created the largest position in Illinois Tool Works Inc. (NYSE:ITW). Adage Capital Management had $16.4 million invested in the company at the end of the quarter. Qing Li's Sciencast Management also initiated a $1.6 million position during the quarter. The other funds with brand new ITW positions are Parvinder Thiara's Athanor Capital, John A. Levin's Levin Capital Strategies, and Bruce Kovner's Caxton Associates LP.
Let's also examine hedge fund activity in other stocks - not necessarily in the same industry as Illinois Tool Works Inc. (NYSE:ITW) but similarly valued. These stocks are NetEase, Inc (NASDAQ:NTES), VMware, Inc. (NYSE:VMW), CME Group Inc (NASDAQ:CME), Automatic Data Processing (NASDAQ:ADP), Regeneron Pharmaceuticals Inc (NASDAQ:REGN), CSX Corporation (NYSE:CSX), and Enbridge Inc (NYSE:ENB). This group of stocks' market values are closest to ITW's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position NTES,45,3666807,7 VMW,31,468712,-11 CME,59,2577224,-1 ADP,42,1927660,-7 REGN,44,1404179,-5 CSX,58,3253140,12 ENB,25,342708,-3 Average,43.4,1948633,-1.1 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 43.4 hedge funds with bullish positions and the average amount invested in these stocks was $1949 million. That figure was $566 million in ITW's case. CME Group Inc (NASDAQ:CME) is the most popular stock in this table. On the other hand Enbridge Inc (NYSE:ENB) is the least popular one with only 25 bullish hedge fund positions. Illinois Tool Works Inc. (NYSE:ITW) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for ITW is 59.6. 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 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 33.3% in 2020 through December 18th and surpassed the market again by 16.4 percentage points. Unfortunately ITW wasn't nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); ITW investors were disappointed as the stock returned 5.5% since the end of September (through 12/18) 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 2020.
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Disclosure: None. This article was originally published at Insider Monkey.