The Williams Companies, Inc. (WMB): Hedge Funds Are Snapping Up

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 Williams Companies, Inc. (NYSE:WMB).

The Williams Companies, Inc. (NYSE:WMB) investors should be aware of an increase in hedge fund sentiment lately. The Williams Companies, Inc. (NYSE:WMB) was in 40 hedge funds’ portfolios at the end of September. The all time high for this statistic is 73. There were 39 hedge funds in our database with WMB positions at the end of the second quarter. Our calculations also showed that WMB isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings).

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium prices have more than doubled over the past year, so we go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. Keeping this in mind let’s take a glance at the fresh hedge fund action regarding The Williams Companies, Inc. (NYSE:WMB).

Bernard Horn of Polaris Capital Management

Do Hedge Funds Think WMB Is A Good Stock To Buy Now?

At third quarter’s end, a total of 40 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 3% from one quarter earlier. By comparison, 38 hedge funds held shares or bullish call options in WMB a year ago. With hedge funds’ positions undergoing their usual ebb and flow, there exists a select group of notable hedge fund managers who were increasing their stakes substantially (or already accumulated large positions).

More specifically, Southeastern Asset Management was the largest shareholder of The Williams Companies, Inc. (NYSE:WMB), with a stake worth $202.6 million reported as of the end of September. Trailing Southeastern Asset Management was Citadel Investment Group, which amassed a stake valued at $128.9 million. Polaris Capital Management, Balyasny Asset Management, and Adage 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 Heronetta Management allocated the biggest weight to The Williams Companies, Inc. (NYSE:WMB), around 6.03% of its 13F portfolio. Southeastern Asset Management is also relatively very bullish on the stock, setting aside 3.84 percent of its 13F equity portfolio to WMB.

With a general bullishness amongst the heavyweights, key money managers have been driving this bullishness. Alyeska Investment Group, managed by Anand Parekh, created the most valuable position in The Williams Companies, Inc. (NYSE:WMB). Alyeska Investment Group had $16.3 million invested in the company at the end of the quarter. Richard SchimeláandáLawrence Sapanski’s Cinctive Capital Management also initiated a $11.2 million position during the quarter. The other funds with new positions in the stock are William Harnisch’s Peconic Partners LLC, Steve Cohen’s Point72 Asset Management, and Michael Gelband’s ExodusPoint Capital.

Let’s also examine hedge fund activity in other stocks similar to The Williams Companies, Inc. (NYSE:WMB). We will take a look at West Pharmaceutical Services Inc. (NYSE:WST), Liberty Broadband Corp (NASDAQ:LBRDK), LyondellBasell Industries NV (NYSE:LYB), Brown-Forman Corporation (NYSE:BF), MongoDB, Inc. (NASDAQ:MDB), Corning Incorporated (NYSE:GLW), and Fomento Económico Mexicano, S.A.B. de C.V. (NYSE:FMX). This group of stocks’ market valuations are similar to WMB’s market valuation.

View table here if you experience formatting issues.

As you can see these stocks had an average of 37.4 hedge funds with bullish positions and the average amount invested in these stocks was $1917 million. That figure was $659 million in WMB’s case. Liberty Broadband Corp (NASDAQ:LBRDK) is the most popular stock in this table. On the other hand Fomento Económico Mexicano, S.A.B. de C.V. (NYSE:FMX) is the least popular one with only 13 bullish hedge fund positions. The Williams Companies, Inc. (NYSE:WMB) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for WMB is 49.4. 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. 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 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 28.6% in 2021 through November 30th and beat the market again by 5.6 percentage points. Unfortunately WMB wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on WMB were disappointed as the stock returned 3.3% since the end of September (through 11/30) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as many of these stocks already outperformed the market since 2019.

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Disclosure: None. This article was originally published at Insider Monkey.