Most investors tend to think that hedge funds and other asset managers are worthless, as they cannot beat even simple index fund portfolios. In fact, most people expect hedge funds to compete with and outperform the bull market that we have witnessed in recent years. However, hedge funds are generally partially hedged and aim at delivering attractive risk-adjusted returns rather than following the ups and downs of equity markets hoping that they will outperform the broader market. Our research shows that certain hedge funds do have great stock picking skills (and we can identify these hedge funds in advance pretty accurately), so let’s take a glance at the smart money sentiment towards The Sherwin-Williams Company (NYSE:SHW).
Is The Sherwin-Williams Company (NYSE:SHW) a healthy stock for your portfolio? Hedge funds were getting more optimistic. The number of bullish hedge fund positions rose by 2 recently. The Sherwin-Williams Company (NYSE:SHW) was in 51 hedge funds’ portfolios at the end of the first quarter of 2021. The all time high for this statistic is 57. Our calculations also showed that SHW isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings). There were 49 hedge funds in our database with SHW holdings at the end of December.
In today’s marketplace there are plenty of metrics shareholders can use to appraise publicly traded companies. Some of the most innovative metrics are hedge fund and insider trading indicators. Our experts have shown that, historically, those who follow the top picks of the top fund managers can outperform the market by a solid amount (see the details here). Also, our monthly newsletter’s portfolio of long stock picks returned 206.8% since March 2017 (through May 2021) and beat the S&P 500 Index by more than 115 percentage points. You can download a sample issue of this newsletter on our website .
Andrew Sandler of Sandler Capital Management
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation, which is why we are checking out this inflation play. We go through lists like 10 best gold stocks to buy to identify promising stocks. 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 we’re going to check out the fresh hedge fund action surrounding The Sherwin-Williams Company (NYSE:SHW).
Do Hedge Funds Think SHW Is A Good Stock To Buy Now?
At the end of March, a total of 51 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 4% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards SHW over the last 23 quarters. With hedgies’ sentiment swirling, there exists a few noteworthy hedge fund managers who were adding to their stakes considerably (or already accumulated large positions).
More specifically, Chilton Investment Company was the largest shareholder of The Sherwin-Williams Company (NYSE:SHW), with a stake worth $296.8 million reported as of the end of March. Trailing Chilton Investment Company was Farallon Capital, which amassed a stake valued at $291.6 million. Diamond Hill Capital, Two Sigma Advisors, and Echo Street Capital Management 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 Chilton Investment Company allocated the biggest weight to The Sherwin-Williams Company (NYSE:SHW), around 8.16% of its 13F portfolio. Bluegrass Capital Partners is also relatively very bullish on the stock, designating 6.45 percent of its 13F equity portfolio to SHW.
As industrywide interest jumped, key hedge funds were breaking ground themselves. Alyeska Investment Group, managed by Anand Parekh, established the most outsized position in The Sherwin-Williams Company (NYSE:SHW). Alyeska Investment Group had $46.3 million invested in the company at the end of the quarter. Ray Dalio’s Bridgewater Associates also initiated a $34.3 million position during the quarter. The other funds with brand new SHW positions are Andrew Sandler’s Sandler Capital Management, Paul Tudor Jones’s Tudor Investment Corp, and Andrew Byington’s Appian Way Asset Management.
Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as The Sherwin-Williams Company (NYSE:SHW) but similarly valued. These stocks are The Southern Company (NYSE:SO), Snowflake Inc (NYSE:SNOW), HCA Healthcare Inc (NYSE:HCA), Equinor ASA (NYSE:EQNR), VMware, Inc. (NYSE:VMW), Intercontinental Exchange Inc (NYSE:ICE), and Air Products & Chemicals, Inc. (NYSE:APD). This group of stocks’ market caps resemble SHW’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| SO | 35 | 464056 | 3 |
| SNOW | 71 | 12965065 | 17 |
| HCA | 62 | 3245183 | -11 |
| EQNR | 8 | 99733 | -10 |
| VMW | 25 | 549319 | -10 |
| ICE | 58 | 3328612 | 5 |
| APD | 32 | 586835 | -18 |
| Average | 41.6 | 3034115 | -3.4 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 41.6 hedge funds with bullish positions and the average amount invested in these stocks was $3034 million. That figure was $2017 million in SHW’s case. Snowflake Inc (NYSE:SNOW) is the most popular stock in this table. On the other hand Equinor ASA (NYSE:EQNR) is the least popular one with only 8 bullish hedge fund positions. The Sherwin-Williams Company (NYSE:SHW) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for SHW is 68. 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. 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 17.4% in 2021 through June 18th and still beat the market by 6.1 percentage points. Hedge funds were also right about betting on SHW, though not to the same extent, as the stock returned 9.2% since Q1 (through June 18th) and outperformed the market as well.
Follow Sherwin Williams Co (NYSE:SHW)
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Disclosure: None. This article was originally published at Insider Monkey.
