Hedge funds and large money managers usually invest with a focus on the long-term horizon and, therefore, short-lived dips or bumps on the charts, usually don't make them change their opinion towards a company. This time it may be different. During the fourth quarter of 2018 we observed increased volatility and small-cap stocks underperformed the market. Things completely reversed during the first quarter. Hedge fund investor letters indicated that they are cutting their overall exposure, closing out some position and doubling down on others. Let’s take a look at the hedge fund sentiment towards The Williams Companies, Inc. (NYSE:WMB) to find out whether it was one of their high conviction long-term ideas.
The Williams Companies, Inc. (NYSE:WMB) investors should pay attention to a decrease in hedge fund sentiment in recent months. WMB was in 32 hedge funds' portfolios at the end of March. There were 39 hedge funds in our database with WMB holdings at the end of the previous quarter. Our calculations also showed that wmb isn't among the 30 most popular stocks among hedge funds.
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. Our research has shown that hedge funds' large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the market by 40 percentage points since May 2014 through May 30, 2019 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that'll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 30.9% through May 30, 2019. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Let's take a glance at the fresh hedge fund action encompassing The Williams Companies, Inc. (NYSE:WMB).
Hedge fund activity in The Williams Companies, Inc. (NYSE:WMB)
At the end of the first quarter, a total of 32 of the hedge funds tracked by Insider Monkey were long this stock, a change of -18% from one quarter earlier. On the other hand, there were a total of 40 hedge funds with a bullish position in WMB 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.
Of the funds tracked by Insider Monkey, Steadfast Capital Management, managed by Robert Pitts, holds the number one position in The Williams Companies, Inc. (NYSE:WMB). Steadfast Capital Management has a $365.2 million position in the stock, comprising 5.7% of its 13F portfolio. Coming in second is Brian J. Higgins of King Street Capital, with a $324.5 million position; the fund has 15.6% of its 13F portfolio invested in the stock. Some other professional money managers that hold long positions comprise Larry Robbins's Glenview Capital, Ken Griffin's Citadel Investment Group and Doug Silverman and Alexander Klabin's Senator Investment Group.
Because The Williams Companies, Inc. (NYSE:WMB) has faced a decline in interest from the smart money, logic holds that there is a sect of hedgies who were dropping their positions entirely in the third quarter. It's worth mentioning that Alec Litowitz and Ross Laser's Magnetar Capital sold off the biggest stake of all the hedgies tracked by Insider Monkey, totaling about $52 million in stock, and Daniel Arbess's Perella Weinberg Partners was right behind this move, as the fund dumped about $45.2 million worth. These bearish behaviors are interesting, as aggregate hedge fund interest dropped by 7 funds in the third quarter.
Let's check out hedge fund activity in other stocks - not necessarily in the same industry as The Williams Companies, Inc. (NYSE:WMB) but similarly valued. We will take a look at Activision Blizzard, Inc. (NASDAQ:ATVI), Fiserv, Inc. (NASDAQ:FISV), Sempra Energy (NYSE:SRE), and Ross Stores, Inc. (NASDAQ:ROST). This group of stocks' market valuations match WMB's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position ATVI,50,2741166,-9 FISV,47,2541202,18 SRE,31,2901864,-3 ROST,29,907288,-4 Average,39.25,2272880,0.5 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 39.25 hedge funds with bullish positions and the average amount invested in these stocks was $2273 million. That figure was $1694 million in WMB's case. Activision Blizzard, Inc. (NASDAQ:ATVI) is the most popular stock in this table. On the other hand Ross Stores, Inc. (NASDAQ:ROST) is the least popular one with only 29 bullish hedge fund positions. The Williams Companies, Inc. (NYSE:WMB) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and 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 WMB wasn't nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); WMB investors were disappointed as the stock returned -7.3% during the same time 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.