Here is What Hedge Funds Think About W.W. Grainger, Inc. (GWW)

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 W.W. Grainger, Inc. (NYSE:GWW).

W.W. Grainger, Inc. (NYSE:GWW) was in 29 hedge funds’ portfolios at the end of June. The all time high for this statistic is 30. GWW investors should be aware of a decrease in hedge fund interest lately. There were 30 hedge funds in our database with GWW holdings at the end of March. Our calculations also showed that GWW isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings).

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. Hedge funds have more than $3.5 trillion in assets under management, so you can’t expect their entire portfolios to beat the market by large margins. Our research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 79 percentage points since March 2017 (see the details here). So you can still find a lot of gems by following hedge funds’ moves today.

David E. Shaw of D.E. Shaw

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. 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. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our homepage. Now let’s take a look at the key hedge fund action encompassing W.W. Grainger, Inc. (NYSE:GWW).

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

At Q2’s end, a total of 29 of the hedge funds tracked by Insider Monkey were long this stock, a change of -3% from the first quarter of 2020. Below, you can check out the change in hedge fund sentiment towards GWW over the last 24 quarters. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

The largest stake in W.W. Grainger, Inc. (NYSE:GWW) was held by AQR Capital Management, which reported holding $73.7 million worth of stock at the end of June. It was followed by Millennium Management with a $25.3 million position. Other investors bullish on the company included Arrowstreet Capital, D E Shaw, and Te Ahumairangi Investment Management. In terms of the portfolio weights assigned to each position Te Ahumairangi Investment Management allocated the biggest weight to W.W. Grainger, Inc. (NYSE:GWW), around 2.06% of its 13F portfolio. Sciencast Management is also relatively very bullish on the stock, dishing out 0.43 percent of its 13F equity portfolio to GWW.

Seeing as W.W. Grainger, Inc. (NYSE:GWW) has faced a decline in interest from the entirety of the hedge funds we track, logic holds that there was a specific group of hedge funds who sold off their entire stakes heading into Q3. It’s worth mentioning that Gabriel Plotkin’s Melvin Capital Management cut the largest stake of the 750 funds tracked by Insider Monkey, worth about $68.9 million in stock, and Renaissance Technologies was right behind this move, as the fund dumped about $43.3 million worth. These bearish behaviors are important to note, as total hedge fund interest dropped by 1 funds heading into Q3.

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as W.W. Grainger, Inc. (NYSE:GWW) but similarly valued. These stocks are CNH Industrial NV (NYSE:CNHI), Trip.com Group Limited (NASDAQ:TCOM), MongoDB, Inc. (NASDAQ:MDB), CGI Inc. (NYSE:GIB), The Clorox Company (NYSE:CLX), Imperial Oil Limited (NYSE:IMO), and Teradyne, Inc. (NASDAQ:TER). This group of stocks’ market values are closest to GWW’s market value.

View table here if you experience formatting issues.

As you can see these stocks had an average of 31.3 hedge funds with bullish positions and the average amount invested in these stocks was $1052 million. That figure was $221 million in GWW’s case. MongoDB, Inc. (NASDAQ:MDB) is the most popular stock in this table. On the other hand CGI Inc. (NYSE:GIB) is the least popular one with only 14 bullish hedge fund positions. W.W. Grainger, Inc. (NYSE:GWW) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for GWW is 58. 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. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. 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 24.9% in 2021 through October 15th and surpassed the market again by 4.5 percentage points. Unfortunately GWW wasn’t nearly as popular as these 5 stocks (hedge fund sentiment was quite bearish); GWW investors were disappointed as the stock returned -1.7% since the end of June (through 10/15) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2021.

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