Our extensive research has shown that imitating the smart money can generate significant returns for retail investors, which is why we track nearly 750 active prominent money managers and analyze their quarterly 13F filings. The stocks that are heavily bought by hedge funds historically outperformed the market, though there is no shortage of high profile failures like hedge funds' 2018 losses in Facebook and Apple. Let’s take a closer look at what the funds we track think about Williams-Sonoma, Inc. (NYSE:WSM) in this article.
Williams-Sonoma, Inc. (NYSE:WSM) was in 24 hedge funds' portfolios at the end of the third quarter of 2019. WSM has seen a decrease in support from the world's most elite money managers of late. There were 27 hedge funds in our database with WSM positions at the end of the previous quarter. Our calculations also showed that WSM isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings). Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Why do we pay any attention at all to hedge fund sentiment? 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 Russell 2000 ETFs by 40 percentage points since May 2014 (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 27.8% through November 21, 2019. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
[caption id="attachment_746893" align="aligncenter" width="473"] Paul Marshall of Marshall Wace[/caption]
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. We're going to analyze the latest hedge fund action encompassing Williams-Sonoma, Inc. (NYSE:WSM).
How have hedgies been trading Williams-Sonoma, Inc. (NYSE:WSM)?
At Q3's end, a total of 24 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -11% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards WSM 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.
More specifically, AQR Capital Management was the largest shareholder of Williams-Sonoma, Inc. (NYSE:WSM), with a stake worth $117 million reported as of the end of September. Trailing AQR Capital Management was Select Equity Group, which amassed a stake valued at $53 million. Balyasny Asset Management, Junto Capital Management, and Samlyn Capital 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 Junto Capital Management allocated the biggest weight to Williams-Sonoma, Inc. (NYSE:WSM), around 2.25% of its portfolio. Ellington is also relatively very bullish on the stock, earmarking 0.68 percent of its 13F equity portfolio to WSM.
Due to the fact that Williams-Sonoma, Inc. (NYSE:WSM) has faced falling interest from the entirety of the hedge funds we track, it's safe to say that there is a sect of hedge funds that slashed their positions entirely by the end of the third quarter. It's worth mentioning that Lee Ainslie's Maverick Capital sold off the largest position of the 750 funds followed by Insider Monkey, worth an estimated $4.4 million in stock, and John Overdeck and David Siegel's Two Sigma Advisors was right behind this move, as the fund said goodbye to about $3.4 million worth. These transactions are important to note, as total hedge fund interest fell by 3 funds by the end of the third quarter.
Let's check out hedge fund activity in other stocks - not necessarily in the same industry as Williams-Sonoma, Inc. (NYSE:WSM) but similarly valued. We will take a look at PG&E Corporation (NYSE:PCG), NewMarket Corporation (NYSE:NEU), Moderna, Inc. (NASDAQ:MRNA), and JBG SMITH Properties (NYSE:JBGS). This group of stocks' market caps match WSM's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position PCG,64,2847473,-3 NEU,27,193660,7 MRNA,8,204933,-10 JBGS,19,235290,2 Average,29.5,870339,-1 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 29.5 hedge funds with bullish positions and the average amount invested in these stocks was $870 million. That figure was $288 million in WSM's case. PG&E Corporation (NYSE:PCG) is the most popular stock in this table. On the other hand Moderna, Inc. (NASDAQ:MRNA) is the least popular one with only 8 bullish hedge fund positions. Williams-Sonoma, Inc. (NYSE:WSM) 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 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately WSM wasn't nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); WSM investors were disappointed as the stock returned 2.8% during the first two months of the fourth quarter 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.