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The Sherwin-Williams Company (SHW): Are Hedge Funds Right About This Stock?

Nina Todic

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 more than 750 13F filings submitted by hedge funds and prominent investors. These filings show these funds' portfolio positions as of September 30th, 2019. What do these smart investors think about The Sherwin-Williams Company (NYSE:SHW)?

The Sherwin-Williams Company (NYSE:SHW) was in 45 hedge funds' portfolios at the end of the third quarter of 2019. SHW has experienced an increase in hedge fund sentiment recently. There were 40 hedge funds in our database with SHW positions at the end of the previous quarter. Our calculations also showed that SHW isn't among the 30 most popular stocks among hedge funds.

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 flagship best performing hedge funds strategy returned 91% since May 2014 and outperformed the Russell 2000 ETFs by nearly 40 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.

[caption id="attachment_30668" align="aligncenter" width="478"] Richard Chilton of Chilton Investment Company[/caption]

CHILTON INVESTMENT COMPANY

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. Let's take a look at the key hedge fund action encompassing The Sherwin-Williams Company (NYSE:SHW).

What have hedge funds been doing with The Sherwin-Williams Company (NYSE:SHW)?

At the end of the third quarter, a total of 45 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 13% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards SHW over the last 17 quarters. So, let's see 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, Farallon Capital was the largest shareholder of The Sherwin-Williams Company (NYSE:SHW), with a stake worth $247.4 million reported as of the end of September. Trailing Farallon Capital was Chilton Investment Company, which amassed a stake valued at $232.6 million. Sculptor Capital, Adage Capital Management, and Iridian Asset Management 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 BlueDrive Global Investors allocated the biggest weight to The Sherwin-Williams Company (NYSE:SHW), around 7.8% of its portfolio. Chilton Investment Company is also relatively very bullish on the stock, setting aside 7.76 percent of its 13F equity portfolio to SHW.

Now, key hedge funds have jumped into The Sherwin-Williams Company (NYSE:SHW) headfirst. Interval Partners, managed by Gregg Moskowitz, created the most outsized position in The Sherwin-Williams Company (NYSE:SHW). Interval Partners had $27.5 million invested in the company at the end of the quarter. Alexander Mitchell's Scopus Asset Management also initiated a $13.5 million position during the quarter. The following funds were also among the new SHW investors: David E. Shaw's D E Shaw, Javier Velazquez's Albar Capital, and Joseph Samuels's Islet Management.

Let's check out hedge fund activity in other stocks similar to The Sherwin-Williams Company (NYSE:SHW). We will take a look at Marsh & McLennan Companies, Inc. (NYSE:MMC), Illinois Tool Works Inc. (NYSE:ITW), Walgreens Boots Alliance Inc (NASDAQ:WBA), and Suncor Energy Inc. (NYSE:SU). This group of stocks' market values are closest to SHW's market value.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position MMC,26,579695,-3 ITW,28,335340,0 WBA,34,831418,-7 SU,37,1416790,5 Average,31.25,790811,-1.25 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 31.25 hedge funds with bullish positions and the average amount invested in these stocks was $791 million. That figure was $1588 million in SHW's case. Suncor Energy Inc. (NYSE:SU) is the most popular stock in this table. On the other hand Marsh & McLennan Companies, Inc. (NYSE:MMC) is the least popular one with only 26 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 34.7% in 2019 through November 22nd and outperformed the S&P 500 ETF (SPY) by 8.5 percentage points. Unfortunately SHW wasn't nearly as popular as these 20 stocks and hedge funds that were betting on SHW were disappointed as the stock returned 4.7% during the fourth quarter (through 11/22) 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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