At Insider Monkey we follow nearly 750 of the best-performing investors and even though many of them lost money in the last couple of months of 2018 (some actually delivered very strong returns), the history teaches us that over the long-run they still manage to beat the market, which is why it can be profitable for us to imitate their activity. Of course, even the best money managers can sometimes get it wrong, but following some of their picks gives us a better chance to outperform the crowd than picking a random stock and this is where our research comes in.
Is Schweitzer-Mauduit International, Inc. (NYSE:SWM) the right pick for your portfolio? Prominent investors are in a bullish mood. The number of bullish hedge fund positions rose by 2 in recent months. Our calculations also showed that SWM isn't among the 30 most popular stocks among hedge funds. SWM was in 10 hedge funds' portfolios at the end of the first quarter of 2019. There were 8 hedge funds in our database with SWM holdings at the end of the previous quarter.
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' large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the market by 40 percentage points since May 2014 through May 30, 2019 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that'll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 30.9% through May 30, 2019. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Let's take a peek at the recent hedge fund action surrounding Schweitzer-Mauduit International, Inc. (NYSE:SWM).
Hedge fund activity in Schweitzer-Mauduit International, Inc. (NYSE:SWM)
Heading into the second quarter of 2019, a total of 10 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 25% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards SWM over the last 15 quarters. With hedge funds' capital changing hands, there exists a select group of key hedge fund managers who were increasing their holdings meaningfully (or already accumulated large positions).
Among these funds, Renaissance Technologies held the most valuable stake in Schweitzer-Mauduit International, Inc. (NYSE:SWM), which was worth $15 million at the end of the first quarter. On the second spot was Millennium Management which amassed $2.7 million worth of shares. Moreover, Royce & Associates, Two Sigma Advisors, and Weld Capital Management were also bullish on Schweitzer-Mauduit International, Inc. (NYSE:SWM), allocating a large percentage of their portfolios to this stock.
Consequently, key money managers have been driving this bullishness. Millennium Management, managed by Israel Englander, established the largest position in Schweitzer-Mauduit International, Inc. (NYSE:SWM). Millennium Management had $2.7 million invested in the company at the end of the quarter. Minhua Zhang's Weld Capital Management also initiated a $0.8 million position during the quarter. The following funds were also among the new SWM investors: Thomas Bailard's Bailard Inc and Jeffrey Talpins's Element Capital Management.
Let's also examine hedge fund activity in other stocks - not necessarily in the same industry as Schweitzer-Mauduit International, Inc. (NYSE:SWM) but similarly valued. These stocks are Summit Hotel Properties Inc (NYSE:INN), Encore Wire Corporation (NASDAQ:WIRE), TriCo Bancshares (NASDAQ:TCBK), and Teekay LNG Partners L.P. (NYSE:TGP). This group of stocks' market valuations are similar to SWM's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position INN,10,14312,-1 WIRE,16,42071,4 TCBK,9,35706,-1 TGP,8,39655,0 Average,10.75,32936,0.5 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 10.75 hedge funds with bullish positions and the average amount invested in these stocks was $33 million. That figure was $24 million in SWM's case. Encore Wire Corporation (NASDAQ:WIRE) is the most popular stock in this table. On the other hand Teekay LNG Partners L.P. (NYSE:TGP) is the least popular one with only 8 bullish hedge fund positions. Schweitzer-Mauduit International, Inc. (NYSE:SWM) is not the least popular stock in this group but hedge fund interest is still below average. 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 6.2% in Q2 through June 19th and outperformed the S&P 500 ETF (SPY) by nearly 3 percentage points. Unfortunately SWM wasn't nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); SWM investors were disappointed as the stock returned -13% during the same time period 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 13 of these stocks already outperformed the market so far in Q2.
Disclosure: None. This article was originally published at Insider Monkey.