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 (see why hell is coming).
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. 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 Worthington Industries, Inc. (NYSE:WOR)? The smart money sentiment can provide an answer to this question.
Worthington Industries, Inc. (NYSE:WOR) has seen an increase in support from the world’s most elite money managers recently. Our calculations also showed that WOR 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).
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by more than 41 percentage points since March 2017 (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 35.3% through March 3rd. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Ray Dalio of Bridgewater Associates
We leave no stone unturned when looking for the next great investment idea. For example, we believe electric vehicles and energy storage are set to become giant markets, and we want to take advantage of the declining lithium prices amid the COVID-19 pandemic. So we are checking out investment opportunities like this one. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. 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. With all of this in mind we’re going to check out the latest hedge fund action encompassing Worthington Industries, Inc. (NYSE:WOR).
How have hedgies been trading Worthington Industries, Inc. (NYSE:WOR)?
At the end of the fourth quarter, a total of 25 of the hedge funds tracked by Insider Monkey were long this stock, a change of 4% from the previous quarter. On the other hand, there were a total of 11 hedge funds with a bullish position in WOR a year ago. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Worthington Industries, Inc. (NYSE:WOR) was held by Royce & Associates, which reported holding $19.8 million worth of stock at the end of September. It was followed by AQR Capital Management with a $7.6 million position. Other investors bullish on the company included Citadel Investment Group, Renaissance Technologies, and GLG Partners. In terms of the portfolio weights assigned to each position AlphaOne Capital Partners allocated the biggest weight to Worthington Industries, Inc. (NYSE:WOR), around 0.63% of its 13F portfolio. Royce & Associates is also relatively very bullish on the stock, setting aside 0.18 percent of its 13F equity portfolio to WOR.
As one would reasonably expect, key money managers were breaking ground themselves. Marshall Wace LLP, managed by Paul Marshall and Ian Wace, assembled the largest position in Worthington Industries, Inc. (NYSE:WOR). Marshall Wace LLP had $0.9 million invested in the company at the end of the quarter. Ray Dalio’s Bridgewater Associates also made a $0.5 million investment in the stock during the quarter. The other funds with new positions in the stock are Qing Li’s Sciencast Management, Matthew Tewksbury’s Stevens Capital Management, and Karim Abbadi and Edward McBride’s Centiva Capital.
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Worthington Industries, Inc. (NYSE:WOR) but similarly valued. We will take a look at Cadence Bancorporation (NYSE:CADE), First Merchants Corporation (NASDAQ:FRME), Grupo Financiero Galicia S.A. (NASDAQ:GGAL), and Banco Macro SA (NYSE:BMA). All of these stocks’ market caps match WOR’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| CADE | 22 | 177353 | 2 |
| FRME | 12 | 111170 | 2 |
| GGAL | 8 | 29637 | 0 |
| BMA | 7 | 115618 | -5 |
| Average | 12.25 | 108445 | -0.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 12.25 hedge funds with bullish positions and the average amount invested in these stocks was $108 million. That figure was $61 million in WOR’s case. Cadence Bancorporation (NYSE:CADE) is the most popular stock in this table. On the other hand Banco Macro SA (NYSE:BMA) is the least popular one with only 7 bullish hedge fund positions. Compared to these stocks Worthington Industries, Inc. (NYSE:WOR) 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 13.0% in 2020 through April 6th and still beat the market by 4.2 percentage points. Unfortunately WOR wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on WOR were disappointed as the stock returned -40.1% during the three months of 2020 (through April 6th) 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 2020.
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.
