While the market driven by short-term sentiment influenced by the accomodative interest rate environment in the US, increasing oil prices and deteriorating expectations towards the resolution of the trade war with China, many smart money investors kept their cautious approach regarding the current bull run in the second quarter and hedging or reducing many of their long positions. Some fund managers like this one are betting on Dow hitting 40,000 to generate strong returns. However, as we know, big investors usually buy stocks with strong fundamentals that can deliver gains both in bull and bear markets, which is why we believe we can profit from imitating them. In this article, we are going to take a look at the smart money sentiment surrounding Weyerhaeuser Co. (NYSE:WY).
Is Weyerhaeuser Co. (NYSE:WY) an excellent investment right now? Money managers are buying. The number of long hedge fund bets went up by 3 recently. Our calculations also showed that WY isn’t among the 30 most popular stocks among hedge funds (see the video below). WY was in 28 hedge funds’ portfolios at the end of June. There were 25 hedge funds in our database with WY holdings at the end of the previous quarter.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
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 25.7% through September 30, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Unlike some fund managers who are betting on Dow reaching 40000 in a year, our long-short investment strategy doesn’t rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. Let’s take a gander at the new hedge fund action encompassing Weyerhaeuser Co. (NYSE:WY).
How are hedge funds trading Weyerhaeuser Co. (NYSE:WY)?
At Q2’s end, a total of 28 of the hedge funds tracked by Insider Monkey were long this stock, a change of 12% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in WY over the last 16 quarters. With the smart money’s capital changing hands, there exists a select group of notable hedge fund managers who were increasing their holdings meaningfully (or already accumulated large positions).
Martin Whitman of Third Avenue Management
More specifically, Third Avenue Management was the largest shareholder of Weyerhaeuser Co. (NYSE:WY), with a stake worth $107.9 million reported as of the end of March. Trailing Third Avenue Management was Point72 Asset Management, which amassed a stake valued at $42.9 million. Samlyn Capital, Adage Capital Management, and Renaissance Technologies were also very fond of the stock, giving the stock large weights in their portfolios.
As industrywide interest jumped, specific money managers were breaking ground themselves. Samlyn Capital, managed by Robert Pohly, initiated the most valuable position in Weyerhaeuser Co. (NYSE:WY). Samlyn Capital had $36.3 million invested in the company at the end of the quarter. Louis Bacon’s Moore Global Investments also made a $9.9 million investment in the stock during the quarter. The following funds were also among the new WY investors: Steve Cohen’s Point72 Asset Management, Perella Weinberg Partners, and Mario Gabelli’s GAMCO Investors.
Let’s also examine hedge fund activity in other stocks similar to Weyerhaeuser Co. (NYSE:WY). These stocks are Palo Alto Networks Inc (NYSE:PANW), The Clorox Company (NYSE:CLX), Essex Property Trust Inc (NYSE:ESS), and Match Group, Inc. (NASDAQ:MTCH). This group of stocks’ market values are similar to WY’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| PANW | 45 | 2343774 | 1 |
| CLX | 28 | 1011768 | -1 |
| ESS | 19 | 508070 | 3 |
| MTCH | 31 | 787531 | 7 |
| Average | 30.75 | 1162786 | 2.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 30.75 hedge funds with bullish positions and the average amount invested in these stocks was $1163 million. That figure was $415 million in WY’s case. Palo Alto Networks Inc (NYSE:PANW) is the most popular stock in this table. On the other hand Essex Property Trust Inc (NYSE:ESS) is the least popular one with only 19 bullish hedge fund positions. Weyerhaeuser Co. (NYSE:WY) is not the least popular stock in this group but hedge fund interest is still below average. Our calculations showed that top 20 most popular stocks among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. A small number of hedge funds were also right about betting on WY as the stock returned 6.5% during the same time frame and outperformed the market by an even larger margin.
Disclosure: None. This article was originally published at Insider Monkey.
