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Were Hedge Funds Right About Flocking Into W.W. Grainger, Inc. (GWW) ?

Nina Todic

Concerns over rising interest rates and expected further rate increases have hit several stocks hard during the fourth quarter. Trends reversed 180 degrees during the first quarter amid Powell's pivot and optimistic expectations towards a trade deal with China. Hedge funds and institutional investors tracked by Insider Monkey usually invest a disproportionate amount of their portfolios in smaller cap stocks. We have been receiving indications that hedge funds were increasing their overall exposure in the first quarter and this is one of the factors behind the recent movements in major indices. In this article, we will take a closer look at hedge fund sentiment towards W.W. Grainger, Inc. (NYSE:GWW).

Is W.W. Grainger, Inc. (NYSE:GWW) a healthy stock for your portfolio? Money managers are getting more bullish. The number of long hedge fund positions inched up by 6 in recent months. Our calculations also showed that gww isn't among the 30 most popular stocks among hedge funds. GWW was in 29 hedge funds' portfolios at the end of March. There were 23 hedge funds in our database with GWW positions at the end of the previous quarter.

Today there are a lot of signals investors use to value their stock investments. Two of the less known signals are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the top fund managers can trounce the market by a superb amount (see the details here).

Steve Cohen SAC CAPITAL ADVISORS

We're going to take a glance at the key hedge fund action encompassing W.W. Grainger, Inc. (NYSE:GWW).

How have hedgies been trading W.W. Grainger, Inc. (NYSE:GWW)?

At the end of the first quarter, a total of 29 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 26% from the previous quarter. The graph below displays the number of hedge funds with bullish position in GWW 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 stakes substantially (or already accumulated large positions).

No of Hedge Funds with GWW Positions

More specifically, AQR Capital Management was the largest shareholder of W.W. Grainger, Inc. (NYSE:GWW), with a stake worth $72.2 million reported as of the end of March. Trailing AQR Capital Management was Millennium Management, which amassed a stake valued at $46.2 million. Point72 Asset Management, Two Sigma Advisors, and Renaissance Technologies were also very fond of the stock, giving the stock large weights in their portfolios.

Now, some big names were leading the bulls' herd. Point72 Asset Management, managed by Steve Cohen, created the most valuable position in W.W. Grainger, Inc. (NYSE:GWW). Point72 Asset Management had $41.2 million invested in the company at the end of the quarter. Jim Simons's Renaissance Technologies also initiated a $34.5 million position during the quarter. The other funds with brand new GWW positions are Ray Dalio's Bridgewater Associates, Gregg Moskowitz's Interval Partners, and Paul Marshall and Ian Wace's Marshall Wace LLP.

Let's also examine hedge fund activity in other stocks similar to W.W. Grainger, Inc. (NYSE:GWW). These stocks are Korea Electric Power Corporation (NYSE:KEP), Diamondback Energy Inc (NASDAQ:FANG), Tenaris S.A. (NYSE:TS), and Liberty Broadband Corp (NASDAQ:LBRDK). This group of stocks' market values match GWW's market value.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position KEP,10,37936,1 FANG,47,1854682,3 TS,15,775378,2 LBRDK,39,3313669,4 Average,27.75,1495416,2.5 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 27.75 hedge funds with bullish positions and the average amount invested in these stocks was $1495 million. That figure was $349 million in GWW's case. Diamondback Energy Inc (NASDAQ:FANG) is the most popular stock in this table. On the other hand Korea Electric Power Corporation (NYSE:KEP) is the least popular one with only 10 bullish hedge fund positions. W.W. Grainger, Inc. (NYSE:GWW) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but 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 1.9% in Q2 through May 30th and outperformed the S&P 500 ETF (SPY) by more than 3 percentage points. Unfortunately GWW wasn't nearly as popular as these 20 stocks and hedge funds that were betting on GWW were disappointed as the stock returned -11.6% during the same 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.

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