Is GWW Stock A Buy or Sell?

With the fourth-quarter round of 13F filings behind us it is time to take a look at the stocks in which some of the best money managers in the world preferred to invest or sell heading into the first quarter of 2021. One of these stocks was W.W. Grainger, Inc. (NYSE:GWW).

Is GWW stock a buy? W.W. Grainger, Inc. (NYSE:GWW) investors should pay attention to an increase in enthusiasm from smart money recently. W.W. Grainger, Inc. (NYSE:GWW) was in 30 hedge funds’ portfolios at the end of the fourth quarter of 2020. The all time high for this statistic is 30. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. There were 28 hedge funds in our database with GWW holdings at the end of September. Our calculations also showed that GWW isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings).

Robert Pohly of Samlyn Capital

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, we heard that billionaire Peter Thiel is backing this psychedelic-drug startup. So, we are taking a closer look at this space. We go through lists like the 10 best biotech stocks under $10 to identify the next stock with 10x upside potential. 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 website. With all of this in mind we’re going to view the new hedge fund action regarding W.W. Grainger, Inc. (NYSE:GWW).

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

Heading into the first quarter of 2021, a total of 30 of the hedge funds tracked by Insider Monkey were long this stock, a change of 7% from the previous quarter. By comparison, 29 hedge funds held shares or bullish call options in GWW a year ago. With hedgies’ positions undergoing their usual ebb and flow, there exists a few key hedge fund managers who were increasing their holdings substantially (or already accumulated large positions).

More specifically, Melvin Capital Management was the largest shareholder of W.W. Grainger, Inc. (NYSE:GWW), with a stake worth $147 million reported as of the end of December. Trailing Melvin Capital Management was Junto Capital Management, which amassed a stake valued at $63.8 million. AQR Capital Management, Samlyn Capital, and D E Shaw 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 Te Ahumairangi Investment Management allocated the biggest weight to W.W. Grainger, Inc. (NYSE:GWW), around 2.19% of its 13F portfolio. Junto Capital Management is also relatively very bullish on the stock, setting aside 2.08 percent of its 13F equity portfolio to GWW.

Consequently, key hedge funds were breaking ground themselves. Melvin Capital Management, managed by Gabriel Plotkin, assembled the largest position in W.W. Grainger, Inc. (NYSE:GWW). Melvin Capital Management had $147 million invested in the company at the end of the quarter. James Parsons’s Junto Capital Management also initiated a $63.8 million position during the quarter. The other funds with new positions in the stock are Nicholas Bagnall’s Te Ahumairangi Investment Management, Steve Cohen’s Point72 Asset Management, and Qing Li’s Sciencast Management.

Let’s check out 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 XP Inc. (NASDAQ:XP), Realty Income Corporation (NYSE:O), Nasdaq, Inc. (NASDAQ:NDAQ), Farfetch Limited (NYSE:FTCH), PPL Corporation (NYSE:PPL), Church & Dwight Co., Inc. (NYSE:CHD), and MarketAxess Holdings Inc. (NASDAQ:MKTX). This group of stocks’ market values match GWW’s market value.

View table here if you experience formatting issues.

As you can see these stocks had an average of 31.4 hedge funds with bullish positions and the average amount invested in these stocks was $902 million. That figure was $507 million in GWW’s case. Farfetch Limited (NYSE:FTCH) is the most popular stock in this table. On the other hand PPL Corporation (NYSE:PPL) is the least popular one with only 21 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 54.3. 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 30 most popular stocks among hedge funds returned 81.2% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 26 percentage points. These stocks gained 12.2% in 2021 through April 12th and surpassed the market again by 1.5 percentage points. Unfortunately GWW wasn’t nearly as popular as these 30 stocks (hedge fund sentiment was quite bearish); GWW investors were disappointed as the stock returned -0.2% since the end of December (through 4/12) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 30 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.

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