Did The Smart Money Get The Williams Companies, Inc. (WMB) Right?

How do you pick the next stock to invest in? One way would be to spend days of research browsing through thousands of publicly traded companies. However, an easier way is to look at the stocks that smart money investors are collectively bullish on. Hedge funds and other institutional investors usually invest large amounts of capital and have to conduct due diligence while choosing their next pick. They don’t always get it right, but, on average, their stock picks historically generated strong returns after adjusting for known risk factors. With this in mind, let’s take a look at the recent hedge fund activity surrounding The Williams Companies, Inc. (NYSE:WMB) and determine whether hedge funds had an edge regarding this stock.

Is The Williams Companies, Inc. (NYSE:WMB) the right investment to pursue these days? The smart money was getting more bullish. The number of bullish hedge fund positions inched up by 1 recently. The Williams Companies, Inc. (NYSE:WMB) was in 40 hedge funds’ portfolios at the end of the third quarter of 2021. The all time high for this statistic is 73. Our calculations also showed that WMB isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings).

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium prices have more than doubled over the past year, so we go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. 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 review the fresh hedge fund action regarding The Williams Companies, Inc. (NYSE:WMB).

Bernard Horn of Polaris Capital Management

Do Hedge Funds Think WMB Is A Good Stock To Buy Now?

Heading into the fourth quarter of 2021, a total of 40 of the hedge funds tracked by Insider Monkey were long this stock, a change of 3% from one quarter earlier. By comparison, 38 hedge funds held shares or bullish call options in WMB a year ago. With the smart money’s positions undergoing their usual ebb and flow, there exists a select group of noteworthy hedge fund managers who were increasing their stakes meaningfully (or already accumulated large positions).

More specifically, Southeastern Asset Management was the largest shareholder of The Williams Companies, Inc. (NYSE:WMB), with a stake worth $202.6 million reported as of the end of September. Trailing Southeastern Asset Management was Citadel Investment Group, which amassed a stake valued at $128.9 million. Polaris Capital Management, Balyasny Asset Management, and Adage 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 Heronetta Management allocated the biggest weight to The Williams Companies, Inc. (NYSE:WMB), around 6.03% of its 13F portfolio. Southeastern Asset Management is also relatively very bullish on the stock, setting aside 3.84 percent of its 13F equity portfolio to WMB.

As one would reasonably expect, some big names have jumped into Williams Companies, Inc. (NYSE:WMB) headfirst. Alyeska Investment Group, managed by Anand Parekh, initiated the biggest position in The Williams Companies, Inc. (NYSE:WMB). Alyeska Investment Group had $16.3 million invested in the company at the end of the quarter. Richard SchimeláandáLawrence Sapanski’s Cinctive Capital Management also initiated a $11.2 million position during the quarter. The other funds with new positions in the stock are William Harnisch’s Peconic Partners LLC, Steve Cohen’s Point72 Asset Management, and Michael Gelband’s ExodusPoint Capital.

Let’s now take a look at hedge fund activity in other stocks similar to The Williams Companies, Inc. (NYSE:WMB). These stocks are West Pharmaceutical Services Inc. (NYSE:WST), Liberty Broadband Corp (NASDAQ:LBRDK), LyondellBasell Industries NV (NYSE:LYB), Brown-Forman Corporation (NYSE:BF), MongoDB, Inc. (NASDAQ:MDB), Corning Incorporated (NYSE:GLW), and Fomento Económico Mexicano, S.A.B. de C.V. (NYSE:FMX). This group of stocks’ market caps are closest to WMB’s market cap.

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As you can see these stocks had an average of 37.4 hedge funds with bullish positions and the average amount invested in these stocks was $1917 million. That figure was $659 million in WMB’s case. Liberty Broadband Corp (NASDAQ:LBRDK) is the most popular stock in this table. On the other hand Fomento Económico Mexicano, S.A.B. de C.V. (NYSE:FMX) is the least popular one with only 13 bullish hedge fund positions. The Williams Companies, Inc. (NYSE:WMB) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for WMB is 49.4. 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 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 29.6% in 2021 and still beat the market by 3.6 percentage points. Hedge funds were also right about betting on WMB as the stock returned 17.2% since the end of Q3 (through 1/31) and outperformed the market. Hedge funds were rewarded for their relative bullishness.

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