Should You Avoid WestRock Company (WRK)?

The financial regulations require hedge funds and wealthy investors that exceeded the $100 million equity holdings threshold to file a report that shows their positions at the end of every quarter. Even though it isn’t the intention, these filings to a certain extent level the playing field for ordinary investors. The latest round of 13F filings disclosed the funds’ positions on March 31st, about a week after the S&P 500 Index bottomed. We at Insider Monkey have made an extensive database of more than 821 of those established hedge funds and famous value investors’ filings. In this article, we analyze how these elite funds and prominent investors traded WestRock Company (NYSE:WRK) based on those filings.

WestRock Company (NYSE:WRK) shareholders have witnessed a decrease in activity from the world’s largest hedge funds of late. WRK was in 26 hedge funds’ portfolios at the end of March. There were 35 hedge funds in our database with WRK holdings at the end of the previous quarter. Our calculations also showed that WRK isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks).

Video: Watch our video about the top 5 most popular hedge fund stocks.

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 58 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 36% through May 18th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Steven Cohen of Point72 Asset Management

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, 2020’s unprecedented market conditions provide us with the highest number of trading opportunities in a decade. So we are checking out stocks recommended/scorned by legendary Bill Miller. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind let’s take a look at the latest hedge fund action regarding WestRock Company (NYSE:WRK).

How have hedgies been trading WestRock Company (NYSE:WRK)?

Heading into the second quarter of 2020, a total of 26 of the hedge funds tracked by Insider Monkey were long this stock, a change of -26% from the previous quarter. On the other hand, there were a total of 23 hedge funds with a bullish position in WRK a year ago. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Ian Simm’s Impax Asset Management has the number one position in WestRock Company (NYSE:WRK), worth close to $90.9 million, amounting to 1.2% of its total 13F portfolio. The second most bullish fund manager is Citadel Investment Group, managed by Ken Griffin, which holds a $79.1 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Remaining peers that hold long positions comprise Anthony Bozza’s Lakewood Capital Management, Cliff Asness’s AQR Capital Management and Paul Marshall and Ian Wace’s Marshall Wace LLP. In terms of the portfolio weights assigned to each position Atlantic Investment Management allocated the biggest weight to WestRock Company (NYSE:WRK), around 11.25% of its 13F portfolio. Lakewood Capital Management is also relatively very bullish on the stock, designating 3.53 percent of its 13F equity portfolio to WRK.

Due to the fact that WestRock Company (NYSE:WRK) has faced a decline in interest from the aggregate hedge fund industry, it’s safe to say that there lies a certain “tier” of fund managers who were dropping their full holdings in the first quarter. Intriguingly, Israel Englander’s Millennium Management dumped the biggest position of the “upper crust” of funds tracked by Insider Monkey, worth an estimated $69.9 million in stock, and Richard SchimeláandáLawrence Sapanski’s Cinctive Capital Management was right behind this move, as the fund cut about $10.3 million worth. These moves are intriguing to say the least, as total hedge fund interest dropped by 9 funds in the first quarter.

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as WestRock Company (NYSE:WRK) but similarly valued. We will take a look at Cognex Corporation (NASDAQ:CGNX), 58.com Inc (NYSE:WUBA), ICON Public Limited Company (NASDAQ:ICLR), and Ares Management L.P. (NYSE:ARES). This group of stocks’ market values are closest to WRK’s market value.

View table here if you experience formatting issues.

As you can see these stocks had an average of 18.5 hedge funds with bullish positions and the average amount invested in these stocks was $278 million. That figure was $412 million in WRK’s case. 58.com Inc (NYSE:WUBA) is the most popular stock in this table. On the other hand Cognex Corporation (NASDAQ:CGNX) is the least popular one with only 16 bullish hedge fund positions. Compared to these stocks WestRock Company (NYSE:WRK) is more popular among hedge funds. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 8.3% in 2020 through the end of May and still beat the market by 13.2 percentage points. Unfortunately WRK wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on WRK were disappointed as the stock returned 0.1% during the second quarter (through the end of May) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 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.