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Although the masses and most of the financial media blame hedge funds for their exorbitant fee structure and disappointing performance, these investors have proved to have great stock picking abilities over the years (that's why their assets under management continue to swell). We believe hedge fund sentiment should serve as a crucial tool of an individual investor’s stock selection process, as it may offer great insights of how the brightest minds of the finance industry feel about specific stocks. After all, these people have access to smartest analysts and expensive data/information sources that individual investors can't match. So should one consider investing in Williams-Sonoma, Inc. (NYSE:WSM)? The smart money sentiment can provide an answer to this question.
Is WSM stock a buy? Hedge funds were getting less bullish. The number of bullish hedge fund positions retreated by 2 lately. Williams-Sonoma, Inc. (NYSE:WSM) was in 29 hedge funds' portfolios at the end of December. The all time high for this statistic is 31. Our calculations also showed that WSM isn't among the 30 most popular stocks among hedge funds (click for Q4 rankings).
In the financial world there are plenty of signals stock traders use to analyze publicly traded companies. A duo of the most underrated signals are hedge fund and insider trading moves. Our researchers have shown that, historically, those who follow the best picks of the elite investment managers can outclass the market by a healthy amount (see the details here).
Cliff Asness of AQR Capital Management
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, we heard that billionaire Peter Thiel is backing this biotech stock. So, we are taking a closer look at this space. We go through lists like the 10 best biotech stocks under $10 to identify the next stock with 10x upside potential. 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 website. With all of this in mind we're going to take a look at the latest hedge fund action encompassing Williams-Sonoma, Inc. (NYSE:WSM).
Do Hedge Funds Think WSM Is A Good Stock To Buy Now?
At the end of the fourth quarter, a total of 29 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -6% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards WSM over the last 22 quarters. With the smart money's positions undergoing their usual ebb and flow, there exists a few noteworthy hedge fund managers who were upping their stakes substantially (or already accumulated large positions).
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Select Equity Group, managed by Robert Joseph Caruso, holds the most valuable position in Williams-Sonoma, Inc. (NYSE:WSM). Select Equity Group has a $250.3 million position in the stock, comprising 1% of its 13F portfolio. Coming in second is Cliff Asness of AQR Capital Management, with a $48.7 million position; 0.1% of its 13F portfolio is allocated to the stock. Remaining professional money managers that are bullish include Clint Carlson's Carlson Capital, Mark Moore's ThornTree Capital Partners and Dmitry Balyasny's Balyasny Asset Management. In terms of the portfolio weights assigned to each position ThornTree Capital Partners allocated the biggest weight to Williams-Sonoma, Inc. (NYSE:WSM), around 2.98% of its 13F portfolio. Carlson Capital is also relatively very bullish on the stock, earmarking 1.45 percent of its 13F equity portfolio to WSM.
Seeing as Williams-Sonoma, Inc. (NYSE:WSM) has faced bearish sentiment from hedge fund managers, logic holds that there exists a select few hedgies that elected to cut their full holdings heading into Q1. Interestingly, Steven Boyd's Armistice Capital cut the biggest stake of all the hedgies tracked by Insider Monkey, worth close to $40.2 million in stock. George McCabe's fund, Portolan Capital Management, also cut its stock, about $6.2 million worth. These bearish behaviors are important to note, as aggregate hedge fund interest fell by 2 funds heading into Q1.
Let's also examine hedge fund activity in other stocks similar to Williams-Sonoma, Inc. (NYSE:WSM). We will take a look at Eaton Vance Corp (NYSE:EV), Axon Enterprise, Inc. (NASDAQ:AAXN), Comerica Incorporated (NYSE:CMA), Lithia Motors Inc (NYSE:LAD), Steel Dynamics, Inc. (NASDAQ:STLD), Regency Centers Corp (NASDAQ:REG), and AGCO Corporation (NYSE:AGCO). This group of stocks' market values are closest to WSM's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position EV,26,732680,3 AAXN,32,495779,0 CMA,38,582061,8 LAD,39,1577323,-10 STLD,27,413067,-1 REG,24,242199,1 AGCO,40,589058,9 Average,32.3,661738,1.4 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 32.3 hedge funds with bullish positions and the average amount invested in these stocks was $662 million. That figure was $496 million in WSM's case. AGCO Corporation (NYSE:AGCO) is the most popular stock in this table. On the other hand Regency Centers Corp (NASDAQ:REG) is the least popular one with only 24 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. Our overall hedge fund sentiment score for WSM is 46.7. 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 30 most popular stocks among hedge funds returned 81.2% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 26 percentage points. These stocks gained 12.2% in 2021 through April 12th and still beat the market by 1.5 percentage points. A small number of hedge funds were also right about betting on WSM as the stock returned 74.4% since the end of the fourth quarter (through 4/12) and outperformed the market by an even larger margin.
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Disclosure: None. This article was originally published at Insider Monkey.