We hate to say this but, we told you so. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW and predicted a US recession when the S&P 500 Index was trading at the 3150 level. We also told you to short the market and buy long-term Treasury bonds. Our article also called for a total international travel ban. While we were warning you, President Trump minimized the threat and failed to act promptly. As a result of his inaction, we will now experience a deeper recession (10 coronavirus predictions).
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. Insider Monkey finished processing 835 13F filings submitted by hedge funds and prominent investors. These filings show these funds’ portfolio positions as of December 31st, 2019. In this article we are going to take a look at smart money sentiment towards Newell Brands Inc. (NYSE:NWL).
Newell Brands Inc. (NYSE:NWL) shareholders have witnessed a decrease in hedge fund sentiment of late. NWL was in 31 hedge funds’ portfolios at the end of the fourth quarter of 2019. There were 32 hedge funds in our database with NWL positions at the end of the previous quarter. Our calculations also showed that NWL isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of this article for Q3 rankings).
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s monthly stock picks returned 72.9% since March 2017 and outperformed the S&P 500 ETFs by more than 41 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
Carl Icahn of Icahn Capital
We leave no stone unturned when looking for the next great investment idea. For example we recently identified a stock that trades 25% below the net cash on its balance sheet. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences, and go through short-term trade recommendations like this one. We even check out the recommendations of services with hard to believe track records. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Now we’re going to take a glance 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 first quarter of 2020, a total of 31 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -3% from the previous quarter. On the other hand, there were a total of 30 hedge funds with a bullish position in NWL a year ago. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Carl Icahn’s Icahn Capital LP has the largest position in Newell Brands Inc. (NYSE:NWL), worth close to $790.3 million, amounting to 3% of its total 13F portfolio. The second largest stake is held by Pzena Investment Management, managed by Richard S. Pzena, which holds a $486.6 million position; 2.3% of its 13F portfolio is allocated to the company. Remaining hedge funds and institutional investors with similar optimism consist of Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital, Ken Griffin’s Citadel Investment Group and Mark Rachesky’s MHR Fund Management. In terms of the portfolio weights assigned to each position Proxima Capital Management allocated the biggest weight to Newell Brands Inc. (NYSE:NWL), around 7.45% of its 13F portfolio. Valueworks LLC is also relatively very bullish on the stock, dishing out 3.76 percent of its 13F equity portfolio to NWL.
Seeing as Newell Brands Inc. (NYSE:NWL) has faced bearish sentiment from the entirety of the hedge funds we track, we can see that there lies a certain “tier” of hedge funds that slashed their positions entirely in the third quarter. Interestingly, Larry Robbins’s Glenview Capital dropped the biggest investment of the “upper crust” of funds tracked by Insider Monkey, worth about $44.6 million in stock. Lee Ainslie’s fund, Maverick Capital, also cut its stock, about $20.2 million worth. These bearish behaviors are interesting, as aggregate hedge fund interest dropped by 1 funds in the third quarter.
Let’s now take a look at hedge fund activity in other stocks similar to Newell Brands Inc. (NYSE:NWL). These stocks are Brookfield Property Partners LP (NYSE:BPY), Aluminum Corp. of China Limited (NYSE:ACH), Hubbell Incorporated (NYSE:HUBB), and Royal Gold, Inc (NASDAQ:RGLD). This group of stocks’ market caps are similar to NWL’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| BPY | 8 | 63332 | 0 |
| ACH | 3 | 4752 | 0 |
| HUBB | 23 | 413964 | -2 |
| RGLD | 30 | 177674 | 3 |
| Average | 16 | 164931 | 0.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 16 hedge funds with bullish positions and the average amount invested in these stocks was $165 million. That figure was $1424 million in NWL’s case. Royal Gold, Inc (NASDAQ:RGLD) is the most popular stock in this table. On the other hand Aluminum Corp. of China Limited (NYSE:ACH) is the least popular one with only 3 bullish hedge fund positions. Compared to these stocks Newell Brands Inc. (NYSE:NWL) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks lost 22.3% in 2020 through March 16th and still beat the market by 3.2 percentage points. Unfortunately NWL wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on NWL were disappointed as the stock returned -35.2% during the first two and a half months of 2020 (through March 16th) 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 most of these stocks already outperformed the market in Q1.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.
