Coronavirus is probably the #1 concern in investors’ minds right now. It should be. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW. We predicted that a US recession is imminent and US stocks will go down by at least 20% in the next 3-6 months. We also told you to short the market ETFs and buy long-term bonds. Investors who agreed with us and replicated these trades are up double digits whereas the market is down double digits. Our article also called for a total international travel ban to prevent the spread of the coronavirus especially from Europe. We were one step ahead of the markets and the president.
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. We have processed the filings of the more than 835 world-class investment firms that we track and now have access to the collective wisdom contained in these filings, which are based on their December 31 holdings, data that is available nowhere else. Should you consider Williams Companies, Inc. (NYSE:WMB) for your portfolio? We’ll look to this invaluable collective wisdom for the answer.
Hedge fund interest in Williams Companies, Inc. (NYSE:WMB) shares was flat at the end of last quarter. This is usually a negative indicator. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as China Unicom (Hong Kong) Limited (NYSE:CHU), Chunghwa Telecom Co., Ltd (NYSE:CHT), and Republic Services, Inc. (NYSE:RSG) to gather more data points. Our calculations also showed that WMB isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video below for Q3 rankings).
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
In the eyes of most stock holders, hedge funds are viewed as unimportant, outdated financial vehicles of yesteryear. While there are more than 8000 funds trading at the moment, We choose to focus on the bigwigs of this group, about 850 funds. These money managers have their hands on the majority of all hedge funds’ total capital, and by shadowing their highest performing picks, Insider Monkey has unsheathed a number of investment strategies that have historically exceeded the broader indices. Insider Monkey’s flagship short hedge fund strategy outrun the S&P 500 short ETFs by around 20 percentage points annually since its inception in March 2017. Our portfolio of short stocks lost 35.3% since February 2017 (through March 3rd) even though the market was up more than 35% during the same period. We just shared a list of 7 short targets in our latest quarterly update .
Mason Hawkins of Southeastern Asset Management
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. With all of this in mind we’re going to go over the latest hedge fund action surrounding Williams Companies, Inc. (NYSE:WMB).
Hedge fund activity in Williams Companies, Inc. (NYSE:WMB)
Heading into the first quarter of 2020, a total of 40 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 0% from the previous quarter. On the other hand, there were a total of 39 hedge funds with a bullish position in WMB a year ago. With the smart money’s sentiment swirling, there exists an “upper tier” of key hedge fund managers who were adding to their holdings considerably (or already accumulated large positions).
Among these funds, Southeastern Asset Management held the most valuable stake in Williams Companies, Inc. (NYSE:WMB), which was worth $195.1 million at the end of the third quarter. On the second spot was Glenview Capital which amassed $186.1 million worth of shares. Millennium Management, Citadel Investment Group, and Levin Easterly Partners were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position BP Capital allocated the biggest weight to Williams Companies, Inc. (NYSE:WMB), around 7.39% of its 13F portfolio. Heronetta Management is also relatively very bullish on the stock, designating 4.78 percent of its 13F equity portfolio to WMB.
Since Williams Companies, Inc. (NYSE:WMB) has experienced declining sentiment from the smart money, we can see that there exists a select few money managers that decided to sell off their positions entirely last quarter. Interestingly, Robert Pitts’s Steadfast Capital Management dumped the biggest stake of the 750 funds watched by Insider Monkey, comprising close to $76.9 million in stock, and Joshua Friedman and Mitchell Julis’s Canyon Capital Advisors was right behind this move, as the fund dumped about $62.9 million worth. These transactions are important to note, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).
Let’s also examine hedge fund activity in other stocks similar to Williams Companies, Inc. (NYSE:WMB). We will take a look at China Unicom (Hong Kong) Limited (NYSE:CHU), Chunghwa Telecom Co., Ltd (NYSE:CHT), Republic Services, Inc. (NYSE:RSG), and TAL Education Group (NYSE:TAL). All of these stocks’ market caps match WMB’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| CHU | 11 | 60557 | 3 |
| CHT | 4 | 121280 | -1 |
| RSG | 26 | 684129 | -9 |
| TAL | 30 | 1805173 | 9 |
| Average | 17.75 | 667785 | 0.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 17.75 hedge funds with bullish positions and the average amount invested in these stocks was $668 million. That figure was $959 million in WMB’s case. TAL Education Group (NYSE:TAL) is the most popular stock in this table. On the other hand Chunghwa Telecom Co., Ltd (NYSE:CHT) is the least popular one with only 4 bullish hedge fund positions. Compared to these stocks Williams Companies, Inc. (NYSE:WMB) 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 WMB wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on WMB were disappointed as the stock returned -41.7% 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.
Disclosure: None. This article was originally published at Insider Monkey.
