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Is The Sherwin-Williams Company (SHW) A Good Stock To Buy?

Nina Todic

Hedge funds run by legendary names like George Soros and David Tepper make billions of dollars a year for themselves and their super-rich accredited investors (you’ve got to have a minimum of $1 million liquid to invest in a hedge fund) by spending enormous resources on analyzing and uncovering data about small-cap stocks that the big brokerage houses don’t follow. Small caps are where they can generate significant outperformance. That's why we pay special attention to hedge fund activity in these stocks.

The Sherwin-Williams Company (NYSE:SHW) investors should be aware of a decrease in hedge fund interest in recent months. SHW was in 42 hedge funds' portfolios at the end of the first quarter of 2019. There were 50 hedge funds in our database with SHW holdings at the end of the previous quarter. Our calculations also showed that shw isn't among the 30 most popular stocks among hedge funds.

If you'd ask most market participants, hedge funds are perceived as underperforming, old investment tools of years past. While there are over 8000 funds trading at the moment, Our experts hone in on the moguls of this group, about 750 funds. These hedge fund managers command bulk of all hedge funds' total capital, and by tailing their first-class equity investments, Insider Monkey has discovered several investment strategies that have historically outpaced the broader indices. Insider Monkey's flagship hedge fund strategy outstripped the S&P 500 index by around 5 percentage points per annum since its inception in May 2014 through the end of May. We were able to generate large returns even by identifying short candidates. Our portfolio of short stocks lost 30.9% since February 2017 (through May 30th) even though the market was up nearly 24% during the same period. We just shared a list of 5 short targets in our latest quarterly update and they are already down an average of 11.9% in less than a couple of weeks whereas our long picks outperformed the market by 2 percentage points in this volatile 2 week period.

FARALLON CAPITAL

We're going to check out the key hedge fund action regarding The Sherwin-Williams Company (NYSE:SHW).

What does the smart money think about The Sherwin-Williams Company (NYSE:SHW)?

At the end of the first quarter, a total of 42 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -16% from the previous quarter. On the other hand, there were a total of 36 hedge funds with a bullish position in SHW a year ago. So, let's find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

No of Hedge Funds with SHW Positions

More specifically, OZ Management was the largest shareholder of The Sherwin-Williams Company (NYSE:SHW), with a stake worth $256.5 million reported as of the end of March. Trailing OZ Management was Farallon Capital, which amassed a stake valued at $165.5 million. Adage Capital Management, Senator Investment Group, and Valinor Management were also very fond of the stock, giving the stock large weights in their portfolios.

Because The Sherwin-Williams Company (NYSE:SHW) has witnessed declining sentiment from the aggregate hedge fund industry, we can see that there lies a certain "tier" of fund managers who sold off their entire stakes last quarter. Interestingly, Daniel Sundheim's D1 Capital Partners dumped the largest stake of the 700 funds monitored by Insider Monkey, worth close to $238 million in stock, and Richard Chilton's Chilton Investment Company was right behind this move, as the fund sold off about $198.1 million worth. These transactions are interesting, as total hedge fund interest dropped by 8 funds last quarter.

Let's go over hedge fund activity in other stocks similar to The Sherwin-Williams Company (NYSE:SHW). These stocks are BCE Inc. (NYSE:BCE), The Kraft Heinz Company (NASDAQ:KHC), Edwards Lifesciences Corporation (NYSE:EW), and Keurig Dr Pepper Inc. (NYSE:KDP). This group of stocks' market values are similar to SHW's market value.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position BCE,16,422698,0 KHC,29,11047679,-4 EW,25,919640,2 KDP,22,557297,1 Average,23,3236829,-0.25 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 23 hedge funds with bullish positions and the average amount invested in these stocks was $3237 million. That figure was $1153 million in SHW's case. The Kraft Heinz Company (NASDAQ:KHC) is the most popular stock in this table. On the other hand BCE Inc. (NYSE:BCE) is the least popular one with only 16 bullish hedge fund positions. Compared to these stocks The Sherwin-Williams Company (NYSE:SHW) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 1.9% in Q2 through May 30th and outperformed the S&P 500 ETF (SPY) by more than 3 percentage points. Hedge funds were also right about betting on SHW, though not to the same extent, as the stock returned -1.2% during the same period and outperformed the market as well.

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

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