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Newell Brands Inc. (NWL): Hedge Funds In Wait-and-See Mode

Abigail Fisher

We can judge whether Newell Brands Inc. (NASDAQ:NWL) is a good investment right now by following the lead of some of the best investors in the world and piggybacking their ideas. There's no better way to get these firms' immense resources and analytical capabilities working for us than to follow their lead into their best ideas. While not all of these picks will be winners, our research shows that these picks historically outperformed the market when we factor in known risk factors.

Hedge fund interest in Newell Brands Inc. (NASDAQ:NWL) shares was flat at the end of last quarter. This is usually a negative indicator. At the end of this article we will also compare NWL to other stocks including China Eastern Airlines Corp. Ltd. (NYSE:CEA), The Mosaic Company (NYSE:MOS), and Universal Display Corporation (NASDAQ:OLED) to get a better sense of its popularity. Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

5 Most Popular Stocks Among Hedge Funds

So, why do we pay attention to hedge fund sentiment before making any investment decisions? 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 Russell 2000 ETFs by 40 percentage points since May 2014 (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. Even if you aren't comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.

[caption id="attachment_25910" align="aligncenter" width="467"] Carl Icahn of Icahn Capital[/caption]

Most Popular Stocks Among Hedge Funds

Unlike the largest US hedge funds that are convinced Dow will soar past 40,000 or the world's most bearish hedge fund that's more convinced than ever that a crash is coming, our long-short investment strategy doesn't rely on bull or bear markets to deliver double digit returns. We only rely on the best performing hedge funds' buy/sell signals. We're going to review the fresh hedge fund action encompassing Newell Brands Inc. (NASDAQ:NWL).

Hedge fund activity in Newell Brands Inc. (NASDAQ:NWL)

Heading into the fourth quarter of 2019, a total of 29 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 0% from the previous quarter. On the other hand, there were a total of 36 hedge funds with a bullish position in NWL a year ago. So, let's see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

NWL_dec2019

The largest stake in Newell Brands Inc. (NASDAQ:NWL) was held by Icahn Capital, which reported holding $769.8 million worth of stock at the end of September. It was followed by Pzena Investment Management with a $471.2 million position. Other investors bullish on the company included Glenview Capital, Maverick Capital, and Citadel Investment Group. In terms of the portfolio weights assigned to each position Proxima Capital Management allocated the biggest weight to Newell Brands Inc. (NASDAQ:NWL), around 7.92% of its portfolio. 13D Management is also relatively very bullish on the stock, setting aside 4.12 percent of its 13F equity portfolio to NWL.

Because Newell Brands Inc. (NASDAQ:NWL) has witnessed a decline in interest from hedge fund managers, it's safe to say that there exists a select few funds that slashed their positions entirely heading into Q4. Intriguingly, Cliff Asness's AQR Capital Management dropped the biggest position of all the hedgies tracked by Insider Monkey, totaling close to $3 million in stock. Steve Cohen's fund, Point72 Asset Management, also dropped its stock, about $1.5 million worth. These bearish behaviors are intriguing to say the least, as total hedge fund interest stayed the same (this is a bearish signal in our experience).

Let's go over hedge fund activity in other stocks - not necessarily in the same industry as Newell Brands Inc. (NASDAQ:NWL) but similarly valued. These stocks are China Eastern Airlines Corp. Ltd. (NYSE:CEA), The Mosaic Company (NYSE:MOS), Universal Display Corporation (NASDAQ:OLED), and Kohl's Corporation (NYSE:KSS). All of these stocks' market caps are similar to NWL's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position CEA,1,657,0 MOS,17,682952,-11 OLED,23,231521,6 KSS,27,495049,-2 Average,17,352545,-1.75 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 17 hedge funds with bullish positions and the average amount invested in these stocks was $353 million. That figure was $1435 million in NWL's case. Kohl's Corporation (NYSE:KSS) is the most popular stock in this table. On the other hand China Eastern Airlines Corp. Ltd. (NYSE:CEA) is the least popular one with only 1 bullish hedge fund positions. Compared to these stocks Newell Brands Inc. (NASDAQ:NWL) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately NWL wasn't nearly as popular as these 20 stocks and hedge funds that were betting on NWL were disappointed as the stock returned 3.9% during the first two months of the fourth quarter 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 70 percent of these stocks already outperformed the market in Q4.

Disclosure: None. This article was originally published at Insider Monkey.

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