A market correction in the fourth quarter, spurred by a number of global macroeconomic concerns and rising interest rates ended up having a negative impact on the markets and many hedge funds as a result. The stocks of smaller companies were especially hard hit during this time as investors fled to investments seen as being safer. This is evident in the fact that the Russell 2000 ETF underperformed the S&P 500 ETF by 4 percentage points during the first half of the fourth quarter. We also received indications that hedge funds were trimming their positions amid the market volatility and uncertainty, and given their greater inclination towards smaller cap stocks than other investors, it follows that a stronger sell-off occurred in those stocks. Let’s study the hedge fund sentiment to see how those concerns affected their ownership of Whirlpool Corporation (NYSE:WHR) during the quarter.
Is Whirlpool Corporation (NYSE:WHR) ready to rally soon? The smart money is in a bearish mood. The number of long hedge fund positions were trimmed by 1 lately. Our calculations also showed that WHR isn’t among the 30 most popular stocks among hedge funds. WHR was in 23 hedge funds’ portfolios at the end of September. There were 24 hedge funds in our database with WHR positions at the end of the previous quarter.
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. Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the market by 18 percentage points since May 2014 through December 3, 2018 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.
Let’s take a look at the latest hedge fund action surrounding Whirlpool Corporation (NYSE:WHR).
What have hedge funds been doing with Whirlpool Corporation (NYSE:WHR)?
At the end of the third quarter, a total of 23 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 WHR over the last 13 quarters. With hedge funds’ capital changing hands, there exists a few notable hedge fund managers who were boosting their stakes substantially (or already accumulated large positions).
According to Insider Monkey’s hedge fund database, Edgar Wachenheim’s Greenhaven Associates has the number one position in Whirlpool Corporation (NYSE:WHR), worth close to $341.9 million, comprising 5.3% of its total 13F portfolio. On Greenhaven Associates’s heels is Roystone Capital Partners, led by Richard Barrera, holding a $45.4 million position; the fund has 3.8% of its 13F portfolio invested in the stock. Some other peers that are bullish include Israel Englander’s Millennium Management, Ken Griffin’s Citadel Investment Group and Joel Greenblatt’s Gotham Asset Management.
Due to the fact that Whirlpool Corporation (NYSE:WHR) has faced a decline in interest from the smart money, logic holds that there lies a certain “tier” of hedge funds that elected to cut their full holdings by the end of the third quarter. Intriguingly, David Cohen and Harold Levy’s Iridian Asset Management sold off the largest position of the “upper crust” of funds followed by Insider Monkey, comprising close to $125.6 million in stock. Dmitry Balyasny’s fund, Balyasny Asset Management, also said goodbye to its stock, about $32.9 million worth. These bearish behaviors are important to note, as aggregate hedge fund interest dropped by 1 funds by the end of the third quarter.
Let’s now review hedge fund activity in other stocks similar to Whirlpool Corporation (NYSE:WHR). These stocks are Pentair plc (NYSE:PNR), Autoliv Inc. (NYSE:ALV), The Carlyle Group LP (NASDAQ:CG), and Harley-Davidson, Inc. (NYSE:HOG). This group of stocks’ market caps are closest to WHR’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| PNR | 24 | 710513 | 1 |
| ALV | 13 | 556381 | -1 |
| CG | 10 | 123719 | 0 |
| HOG | 20 | 154494 | 3 |
| Average | 16.75 | 386277 | 0.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 16.75 hedge funds with bullish positions and the average amount invested in these stocks was $386 million. That figure was $586 million in WHR’s case. Pentair plc (NYSE:PNR) is the most popular stock in this table. On the other hand The Carlyle Group LP (NASDAQ:CG) is the least popular one with only 10 bullish hedge fund positions. Whirlpool Corporation (NYSE:WHR) 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. In this regard PNR might be a better candidate to consider a long position.
Disclosure: None. This article was originally published at Insider Monkey.
