It was a rough fourth quarter for many hedge funds, which were naturally unable to overcome the big dip in the broad market, as the S&P 500 fell by about 4.8% during 2018 and average hedge fund losing about 1%. The Russell 2000, composed of smaller companies, performed even worse, trailing the S&P by more than 6 percentage points, as investors fled less-known quantities for safe havens. Luckily hedge funds were shifting their holdings into large-cap stocks. The 20 most popular hedge fund stocks actually generated an average return of 18.7% so far in 2019 and outperformed the S&P 500 ETF by 6.6 percentage points. We are done processing the latest 13f filings and in this article we will study how hedge fund sentiment towards Newell Brands Inc. (NASDAQ:NWL) changed during the first quarter.
Hedge fund interest in Newell Brands Inc. (NASDAQ:NWL) 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 Hanesbrands Inc. (NYSE:HBI), Dolby Laboratories, Inc. (NYSE:DLB), and Telecom Argentina S.A. (NYSE:TEO) to gather more data points.
To most traders, hedge funds are viewed as slow, outdated investment tools of years past. While there are greater than 8000 funds with their doors open at the moment, We look at the bigwigs of this club, around 750 funds. These investment experts watch over most of all hedge funds’ total asset base, and by tracking their finest equity investments, Insider Monkey has figured out many investment strategies that have historically outperformed Mr. Market. Insider Monkey’s flagship hedge fund strategy beat the S&P 500 index by around 5 percentage points annually since its inception in May 2014 through the end of May. We were able to generate large returns even by identifying short candidates. Our portfolio of short stocks lost 30.9% since February 2017 (through May 30th) even though the market was up nearly 24% during the same period. We just shared a list of 5 short targets in our latest quarterly update and they are already down an average of 11.9% in less than a couple of weeks whereas our long picks outperformed the market by 2 percentage points in this volatile 2 week period.
Let’s go over the latest hedge fund action encompassing Newell Brands Inc. (NASDAQ:NWL).
What does the smart money think about Newell Brands Inc. (NASDAQ:NWL)?
At Q1’s end, a total of 30 of the hedge funds tracked by Insider Monkey were long this stock, a change of 0% from the fourth quarter of 2018. The graph below displays the number of hedge funds with bullish position in NWL over the last 15 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 Newell Brands Inc. (NASDAQ:NWL) was held by Icahn Capital LP, which reported holding $630.8 million worth of stock at the end of March. It was followed by Pzena Investment Management with a $380.7 million position. Other investors bullish on the company included Citadel Investment Group, Renaissance Technologies, and Millennium Management.
Judging by the fact that Newell Brands Inc. (NASDAQ:NWL) has faced a decline in interest from hedge fund managers, we can see that there exists a select few hedgies that decided to sell off their entire stakes heading into Q3. Intriguingly, Jonathan Kolatch’s Redwood Capital Management said goodbye to the largest position of the “upper crust” of funds monitored by Insider Monkey, worth about $10.8 million in call options. Don Morgan’s fund, Brigade Capital, also sold off its call options, about $10.1 million worth. These bearish behaviors are interesting, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Newell Brands Inc. (NASDAQ:NWL) but similarly valued. We will take a look at Hanesbrands Inc. (NYSE:HBI), Dolby Laboratories, Inc. (NYSE:DLB), Telecom Argentina S.A. (NYSE:TEO), and Mellanox Technologies, Ltd. (NASDAQ:MLNX). This group of stocks’ market values match NWL’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| HBI | 30 | 523605 | 2 |
| DLB | 29 | 535572 | 6 |
| TEO | 9 | 89696 | 0 |
| MLNX | 41 | 1454898 | -4 |
| Average | 27.25 | 650943 | 1 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 27.25 hedge funds with bullish positions and the average amount invested in these stocks was $651 million. That figure was $1295 million in NWL’s case. Mellanox Technologies, Ltd. (NASDAQ:MLNX) is the most popular stock in this table. On the other hand Telecom Argentina S.A. (NYSE:TEO) is the least popular one with only 9 bullish hedge fund positions. Newell Brands Inc. (NASDAQ:NWL) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 20 most popular stocks among hedge funds returned 1.9% in Q2 through May 30th and outperformed the S&P 500 ETF (SPY) by more than 3 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 -11.1% during the same period 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 13 of these stocks already outperformed the market so far in Q2.
Disclosure: None. This article was originally published at Insider Monkey.
