Did Hedge Funds Make The Right Call On Weyerhaeuser Co. (WY) ?

Insider Monkey has processed numerous 13F filings of hedge funds and successful value investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds’ and successful investors’ positions as of the end of the first quarter. You can find articles about an individual hedge fund’s trades on numerous financial news websites. However, in this article we will take a look at their collective moves over the last 4.5 years and analyze what the smart money thinks of Weyerhaeuser Co. (NYSE:WY) based on that data and determine whether they were really smart about the stock.

Weyerhaeuser Co. (NYSE:WY) shareholders have witnessed an increase in support from the world’s most elite money managers lately. WY was in 35 hedge funds’ portfolios at the end of March. There were 30 hedge funds in our database with WY positions at the end of the previous quarter. Our calculations also showed that WY 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.

In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s monthly stock picks returned 101% since March 2017 and outperformed the S&P 500 ETFs by more than 58 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

Steven Cohen of Point72 Asset Management

At Insider Monkey we scour multiple sources to uncover the next great investment idea. There is a lot of volatility in the markets and this presents amazing investment opportunities from time to time. For example, this trader claims to deliver juiced up returns with one trade a week, so we are checking out his highest conviction idea. A second trader claims to score lucrative profits by utilizing a “weekend trading strategy”, so we look into his strategy’s picks. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We recently recommended several stocks partly inspired by legendary Bill Miller’s investor letter. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 in February after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind we’re going to view the new hedge fund action surrounding Weyerhaeuser Co. (NYSE:WY).

How are hedge funds trading Weyerhaeuser Co. (NYSE:WY)?

At Q1’s end, a total of 35 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 17% from the previous quarter. The graph below displays the number of hedge funds with bullish position in WY over the last 18 quarters. With the smart money’s positions undergoing their usual ebb and flow, there exists an “upper tier” of notable hedge fund managers who were boosting their stakes considerably (or already accumulated large positions).

The largest stake in Weyerhaeuser Co. (NYSE:WY) was held by Citadel Investment Group, which reported holding $47.5 million worth of stock at the end of September. It was followed by Third Avenue Management with a $31.1 million position. Other investors bullish on the company included Renaissance Technologies, Arrowstreet Capital, and Gotham Asset Management. In terms of the portfolio weights assigned to each position Third Avenue Management allocated the biggest weight to Weyerhaeuser Co. (NYSE:WY), around 4.61% of its 13F portfolio. Bourgeon Capital is also relatively very bullish on the stock, setting aside 2.16 percent of its 13F equity portfolio to WY.

Now, some big names have jumped into Weyerhaeuser Co. (NYSE:WY) headfirst. Arrowstreet Capital, managed by Peter Rathjens, Bruce Clarke and John Campbell, initiated the most outsized position in Weyerhaeuser Co. (NYSE:WY). Arrowstreet Capital had $20.7 million invested in the company at the end of the quarter. Greg Poole’s Echo Street Capital Management also initiated a $3.8 million position during the quarter. The other funds with brand new WY positions are Ken Heebner’s Capital Growth Management, Steve Cohen’s Point72 Asset Management, and D. E. Shaw’s D E Shaw.

Let’s check out hedge fund activity in other stocks similar to Weyerhaeuser Co. (NYSE:WY). We will take a look at The Hartford Financial Services Group, Inc. (NYSE:HIG), CBRE Group, Inc. (NYSE:CBRE), MarketAxess Holdings Inc. (NASDAQ:MKTX), and Ameriprise Financial, Inc. (NYSE:AMP). All of these stocks’ market caps resemble WY’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
HIG 37 708354 3
CBRE 33 1142791 3
MKTX 27 711821 0
AMP 26 605759 -11
Average 30.75 792181 -1.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 30.75 hedge funds with bullish positions and the average amount invested in these stocks was $792 million. That figure was $196 million in WY’s case. The Hartford Financial Services Group, Inc. (NYSE:HIG) is the most popular stock in this table. On the other hand Ameriprise Financial, Inc. (NYSE:AMP) is the least popular one with only 26 bullish hedge fund positions. Weyerhaeuser Co. (NYSE:WY) is not the most popular stock in this group but hedge fund interest is still above average. 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 12.3% in 2020 through June 30th but still beat the market by 15.5 percentage points. Hedge funds were also right about betting on WY as the stock returned 32.5% in Q2 and outperformed the market. Hedge funds were rewarded for their relative bullishness.

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