“Market conditions are changing. The continued rise in interest rates suggests we are in the early stages of a bond bear market, which could intensify as central banks withdraw liquidity. The receding tide of liquidity will start to reveal more rocks beyond what has been exposed in emerging markets so far, and the value of a value discipline will be in avoiding the biggest capital-destroying rocks. If a rock emerges on the crowded shore of U.S. momentum, it could result in a major liquidity challenge, as momentum is often most intense on the downside as a crowded trade reverses. So investors are facing a large potential trade-off right now: continue to bet on the current dominance of momentum and the S&P 500, or bet on change and take an active value bet in names with attractive value and optionality, but with negative momentum,” said Clearbridge Investments in its market commentary. We aren’t sure whether long-term interest rates will top 5% and value stocks outperform growth, but we follow hedge fund investor letters to understand where the markets and stocks might be going. This article will lay out and discuss the hedge fund and institutional investor sentiment towards Newell Brands Inc. (NYSE:NWL).
Is Newell Brands Inc. (NYSE:NWL) worth your attention right now? The smart money is taking a bullish view. The number of bullish hedge fund bets advanced by 3 recently. Our calculations also showed that NWL isn’t among the 30 most popular stocks among hedge funds.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? Our research has shown that hedge funds’ small-cap stock picks managed to the beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the market by 18 percentage points since May 2014 through December 3, 2018 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in our short portfolio.
Let’s take a gander at the latest hedge fund action regarding Newell Brands Inc. (NYSE:NWL).
How are hedge funds trading Newell Brands Inc. (NYSE:NWL)?
Heading into the fourth quarter of 2018, a total of 36 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 9% from one quarter earlier. On the other hand, there were a total of 25 hedge funds with a bullish position in NWL at the beginning of this year. With hedge funds’ capital changing hands, there exists a select group of noteworthy hedge fund managers who were boosting their stakes substantially (or already accumulated large positions).
When looking at the institutional investors followed by Insider Monkey, Icahn Capital LP, managed by Carl Icahn, holds the number one position in Newell Brands Inc. (NYSE:NWL). Icahn Capital LP has a $785.6 million position in the stock, comprising 3.1% of its 13F portfolio. On Icahn Capital LP’s heels is Larry Robbins of Glenview Capital, with a $393.7 million position; 2.5% of its 13F portfolio is allocated to the stock. Some other hedge funds and institutional investors that hold long positions encompass Richard S. Pzena’s Pzena Investment Management, and Ken Griffin’s Citadel Investment Group.
As industrywide interest jumped, key hedge funds have jumped into Newell Brands Inc. (NYSE:NWL) headfirst. Brigade Capital, managed by Don Morgan, created the biggest call position in Newell Brands Inc. (NYSE:NWL). Brigade Capital had $11 million invested in the company at the end of the quarter. Israel Englander’s Millennium Management also made a $10.2 million investment in the stock during the quarter. The following funds were also among the new NWL investors: Perella Weinberg Partners, Michael Hintze’s CQS Cayman, and Malcolm Fairbairn’s Ascend Capital.
Let’s check out hedge fund activity in other stocks similar to Newell Brands Inc. (NYSE:NWL). These stocks are SEI Investments Company (NASDAQ:SEIC), Lear Corporation (NYSE:LEA), Zebra Technologies Corporation (NASDAQ:ZBRA), and Avery Dennison Corporation (NYSE:AVY). All of these stocks’ market caps resemble NWL’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| SEIC | 24 | 360985 | 2 |
| LEA | 34 | 845180 | 2 |
| ZBRA | 27 | 893057 | -5 |
| AVY | 29 | 462957 | 3 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 28.5 hedge funds with bullish positions and the average amount invested in these stocks was $641 million. That figure was $1.7 billion in NWL’s case. Lear Corporation (NYSE:LEA) is the most popular stock in this table. On the other hand SEI Investments Company (NASDAQ:SEIC) is the least popular one with only 24 bullish hedge fund positions. Compared to these stocks Newell Brands Inc. (NYSE:NWL) is more popular among hedge funds. Considering that hedge funds are fond of this stock in relation to its market cap peers, it may be a good idea to analyze it in detail and potentially include it in your portfolio.
Disclosure: None. This article was originally published at Insider Monkey.
