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Stanley Black & Decker, Inc. (SWK): Hedge Funds Taking Some Chips Off The Table

Debasis Saha
·6 mins read

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. We at Insider Monkey have plowed through 823 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds' and investors' portfolio positions as of June 30th, when the S&P 500 Index was trading around the 3100 level. Stocks kept going up since then. In this article we look at how hedge funds traded Stanley Black & Decker, Inc. (NYSE:SWK) and determine whether the smart money was really smart about this stock.

Stanley Black & Decker, Inc. (NYSE:SWK) was in 33 hedge funds' portfolios at the end of the second quarter of 2020. The all time high for this statistics is 41. SWK investors should be aware of a decrease in enthusiasm from smart money recently. There were 36 hedge funds in our database with SWK positions at the end of the first quarter. Our calculations also showed that SWK isn't among the 30 most popular stocks among hedge funds (click for Q2 rankings and see the video for a quick look at the top 5 stocks). Video: Watch our video about the top 5 most popular hedge fund stocks.

Today there are a multitude of methods market participants can use to assess publicly traded companies. Two of the most useful methods are hedge fund and insider trading activity. We have shown that, historically, those who follow the best picks of the best fund managers can trounce their index-focused peers by a significant amount (see the details here).

Richard Pzena - Pzena Investment Management
Richard Pzena - Pzena Investment Management

Richard S. Pzena of Pzena Investment Management

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, this “mom” trader turned $2000 into $2 million within 2 years. So, we are checking out her best trade idea of the month. Cannabis stocks are roaring back in 2020, which is why we are also checking out this under-the-radar stock. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We go through lists like the 10 most profitable companies in the world to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. Keeping this in mind we're going to take a gander at the latest hedge fund action surrounding Stanley Black & Decker, Inc. (NYSE:SWK).

What have hedge funds been doing with Stanley Black & Decker, Inc. (NYSE:SWK)?

At the end of June, a total of 33 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -8% from the first quarter of 2020. The graph below displays the number of hedge funds with bullish position in SWK over the last 20 quarters. So, let's see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Is SWK A Good Stock To Buy?
Is SWK A Good Stock To Buy?

More specifically, Pzena Investment Management was the largest shareholder of Stanley Black & Decker, Inc. (NYSE:SWK), with a stake worth $355.6 million reported as of the end of September. Trailing Pzena Investment Management was Ariel Investments, which amassed a stake valued at $78.2 million. Junto Capital Management, Adage Capital Management, and PEAK6 Capital 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 SAYA Management allocated the biggest weight to Stanley Black & Decker, Inc. (NYSE:SWK), around 6.67% of its 13F portfolio. Wexford Capital is also relatively very bullish on the stock, designating 3.26 percent of its 13F equity portfolio to SWK.

Due to the fact that Stanley Black & Decker, Inc. (NYSE:SWK) has experienced a decline in interest from the aggregate hedge fund industry, we can see that there is a sect of hedgies who were dropping their entire stakes last quarter. It's worth mentioning that Peter Rathjens, Bruce Clarke and John Campbell's Arrowstreet Capital sold off the largest position of all the hedgies tracked by Insider Monkey, totaling an estimated $20.1 million in stock, and Steve Cohen's Point72 Asset Management was right behind this move, as the fund said goodbye to about $7.4 million worth. These bearish behaviors are interesting, as total hedge fund interest dropped by 3 funds last quarter.

Let's now take a look at hedge fund activity in other stocks - not necessarily in the same industry as Stanley Black & Decker, Inc. (NYSE:SWK) but similarly valued. These stocks are Skyworks Solutions Inc (NASDAQ:SWKS), Trane Technologies plc (NYSE:TT), TELUS Corporation (NYSE:TU), FleetCor Technologies, Inc. (NYSE:FLT), Aptiv PLC (NYSE:APTV), FirstEnergy Corp. (NYSE:FE), and Simon Property Group, Inc (NYSE:SPG). This group of stocks' market caps are similar to SWK's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position SWKS,49,993689,20 TT,40,730073,4 TU,15,194956,0 FLT,53,2212169,2 APTV,43,1158307,10 FE,41,992017,-3 SPG,27,531930,-2 Average,38.3,973306,4.4 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 38.3 hedge funds with bullish positions and the average amount invested in these stocks was $973 million. That figure was $807 million in SWK's case. FleetCor Technologies, Inc. (NYSE:FLT) is the most popular stock in this table. On the other hand TELUS Corporation (NYSE:TU) is the least popular one with only 15 bullish hedge fund positions. Stanley Black & Decker, Inc. (NYSE:SWK) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for SWK is 49.8. 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 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 33% in 2020 through the end of August and beat the market by 23.2 percentage points. A small number of hedge funds were also right about betting on SWK, though not to the same extent, as the stock returned 16.2% during the first two months of Q3 and outperformed the market.

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

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