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Was The Smart Money Right About Weyerhaeuser Co. (WY)?

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·6 min read
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At Insider Monkey, we pore over the filings of nearly 887 top investment firms every quarter, a process we have now completed for the latest reporting period. The data we've gathered as a result gives us access to a wealth of collective knowledge based on these firms' portfolio holdings as of December 31st. In this article, we will use that wealth of knowledge to determine whether or not Weyerhaeuser Co. (NYSE:WY) makes for a good investment right now.

Weyerhaeuser Co. (NYSE:WY) has experienced a decrease in hedge fund sentiment lately. Weyerhaeuser Co. (NYSE:WY) was in 40 hedge funds' portfolios at the end of December. The all time high for this statistic is 41. There were 41 hedge funds in our database with WY positions at the end of the third quarter. Our calculations also showed that WY isn't among the 30 most popular stocks among hedge funds (click for Q4 rankings).

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. Hedge funds have more than $3.5 trillion in assets under management, so you can't expect their entire portfolios to beat the market by large margins. Our research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 124 percentage points since March 2017 (see the details here). So you can still find a lot of gems by following hedge funds' moves today.

Martin Whitman Third Avenue Management Marty Whitman
Martin Whitman Third Avenue Management Marty Whitman

Martin Whitman of Third Avenue Management

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. We go through lists like the 10 best hydrogen fuel cell stocks to pick the next Tesla that will deliver a 10x return. 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 homepage. With all of this in mind we're going to view the key hedge fund action regarding Weyerhaeuser Co. (NYSE:WY).

Do Hedge Funds Think WY Is A Good Stock To Buy Now?

At Q4's end, a total of 40 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -2% from the third quarter of 2020. On the other hand, there were a total of 30 hedge funds with a bullish position in WY a year ago. So, let's review 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, Diamond Hill Capital, managed by Ric Dillon, holds the number one position in Weyerhaeuser Co. (NYSE:WY). Diamond Hill Capital has a $220.3 million position in the stock, comprising 1% of its 13F portfolio. On Diamond Hill Capital's heels is Renaissance Technologies, holding a $64.9 million position; 0.1% of its 13F portfolio is allocated to the company. Other professional money managers that hold long positions include Israel Englander's Millennium Management, Martin Whitman's Third Avenue Management and Ken Griffin's Citadel Investment Group. In terms of the portfolio weights assigned to each position Third Avenue Management allocated the biggest weight to Weyerhaeuser Co. (NYSE:WY), around 6.29% of its 13F portfolio. Sandbar Asset Management is also relatively very bullish on the stock, designating 2.39 percent of its 13F equity portfolio to WY.

Since Weyerhaeuser Co. (NYSE:WY) has experienced bearish sentiment from hedge fund managers, it's easy to see that there lies a certain "tier" of funds who sold off their positions entirely by the end of the fourth quarter. Interestingly, Alexander Mitchell's Scopus Asset Management sold off the biggest stake of the 750 funds watched by Insider Monkey, valued at an estimated $19.3 million in stock, and Eduardo Abush's Waterfront Capital Partners was right behind this move, as the fund cut about $4.3 million worth. These transactions are interesting, as total hedge fund interest was cut by 1 funds by the end of the fourth quarter.

Let's check out hedge fund activity in other stocks - not necessarily in the same industry as Weyerhaeuser Co. (NYSE:WY) but similarly valued. We will take a look at ZTO Express (Cayman) Inc. (NYSE:ZTO), PG&E Corporation (NYSE:PCG), Verisign, Inc. (NASDAQ:VRSN), Keysight Technologies Inc (NYSE:KEYS), ArcelorMittal (NYSE:MT), Coupa Software Incorporated (NASDAQ:COUP), and Yandex NV (NASDAQ:YNDX). All of these stocks' market caps resemble WY's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position ZTO,17,426129,-5 PCG,66,6651557,-10 VRSN,47,6421904,1 KEYS,27,592599,-9 MT,18,511254,-2 COUP,62,4125119,12 YNDX,34,1623779,1 Average,38.7,2907477,-1.7 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 38.7 hedge funds with bullish positions and the average amount invested in these stocks was $2907 million. That figure was $614 million in WY's case. PG&E Corporation (NYSE:PCG) is the most popular stock in this table. On the other hand ZTO Express (Cayman) Inc. (NYSE:ZTO) is the least popular one with only 17 bullish hedge fund positions. Weyerhaeuser Co. (NYSE:WY) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for WY is 56.7. 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. Our calculations showed that top 10 most popular stocks among hedge funds returned 90.7% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 35 percentage points. These stocks gained 13.6% in 2021 through April 30th and still beat the market by 1.6 percentage points. Hedge funds were also right about betting on WY as the stock returned 16.2% since the end of Q4 (through 4/30) and outperformed the market. Hedge funds were rewarded for their relative bullishness.

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

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