The Valspar Corp (NYSE:VAL) reported second quarter of fiscal year 2016 earnings of $1.22 per share on sales of $1.06 billion today, missing estimates by $0.04 per share and $60 million respectively. Sales inched lower by 1.9% year-over-year, mainly due to a negative 3% impact from currently translation. Total volumes declined by 1%, led by the paints segment which saw volume drop by 6%. Adjusted EBIT rose by 2%, driven by growth in the coatings and paints segments. Valspar’s stock is relatively unchanged given that Sherwin-Williams Co (NYSE:SHW) agreed to acquire the company for $113 per share in an all-cash transaction on March 20, in a deal that is expected to face limited resistance. Shares of Sherwin-Williams are also being unaffected by Valspar’s results seemingly, as they are relatively flat today as well.
Is The Valspar Corporation (NYSE:VAL) a good stock to buy right now? We at Insider Monkey like to examine what billionaires and hedge funds think of a company before doing days of research on it. Given their 2 and 20 payment structure, hedge funds have more resources than the average investor. The funds have access to expert networks and get tips from industry insiders. They also have numerous Ivy League graduates and MBAs. The Valspar Corporation (NYSE:VAL) was in 28 hedge funds’ portfolios at the end of the first quarter of 2016. VAL investors should pay attention to an increase in hedge fund sentiment in recent months. There were 15 hedge funds in our database with VAL holdings at the end of the previous quarter.
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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 Global Payments Inc (NYSE:GPN), Scripps Networks Interactive, Inc. (NYSE:SNI), and Everest Re Group Ltd (NYSE:RE) to gather more data points.
We track prominent investors and hedge funds because our research has shown that historically their stock picks delivered superior risk-adjusted returns. This is especially true in the small-cap space. The 15 most popular small-cap stocks among a select group of investors delivered a monthly alpha of 80 basis points between 1999 and 2012 (see the details here).
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, David Cohen and Harold Levy’s Iridian Asset Management has the largest position in The Valspar Corporation (NYSE:VAL), worth close to $378.2 million, comprising 3.2% of its total 13F portfolio. The second most bullish fund manager is Magnetar Capital, managed by Alec Litowitz and Ross Laser, which holds a $83.7 million position; the fund has 1.7% of its 13F portfolio invested in the stock. Some other members of the smart money with similar optimism include Mark Wolfson and Jamie Alexander’s Jasper Ridge Partners, Robert Emil Zoellner’s Alpine Associates, and Jim Simons’ Renaissance Technologies.
On the next page we’ll look at some funds that took up positions in Valspar during Q1, as well as compare the stock to a handful of others with similar market caps.
As one would reasonably expect, specific money managers have jumped into The Valspar Corporation (NYSE:VAL) headfirst. Magnetar Capital established the biggest position in The Valspar Corporation (NYSE:VAL). Magnetar Capital had $83.7 million invested in the company at the end of the quarter. Alpine Associates also initiated a $47 million position during the quarter. The other funds with brand new VAL positions are Glenn Russell Dubin’s Highbridge Capital Management, John Orrico’s Water Island Capital, and Matthew Tewksbury’s Stevens Capital Management.
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as The Valspar Corporation (NYSE:VAL) but similarly valued. We will take a look at Global Payments Inc (NYSE:GPN), Scripps Networks Interactive, Inc. (NYSE:SNI), Everest Re Group Ltd (NYSE:RE), and Alliant Energy Corporation (NYSE:LNT). This group of stocks’ market values are closest to VAL’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| GPN | 24 | 346643 | -4 |
| SNI | 23 | 1205604 | 1 |
| RE | 20 | 566550 | -3 |
| LNT | 14 | 105251 | 2 |
As you can see these stocks had an average of 20 hedge funds with bullish positions and the average amount invested in these stocks was $556 million. That figure was $841 million in VAL’s case. Global Payments Inc (NYSE:GPN) is the most popular stock in this table. On the other hand Alliant Energy Corporation (NYSE:LNT) is the least popular one with only 14 bullish hedge fund positions. Compared to these stocks The Valspar Corporation (NYSE:VAL) is more popular among hedge funds. Considering that hedge funds are fond of this stock in relation to its market cap peers, it may be a good idea to analyze it in detail and potentially include it in your portfolio.
Disclosure: None
