We know that hedge funds generate strong, risk-adjusted returns over the long run, which is why imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, professional investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn’t mean that they don’t have occasional colossal losses; they do. However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, let’s examine the smart money sentiment towards Whirlpool Corporation (NYSE:WHR) and determine whether hedge funds skillfully traded this stock.
Is Whirlpool Corporation (NYSE:WHR) the right investment to pursue these days? Prominent investors were taking a bullish view. The number of long hedge fund bets advanced by 1 lately. Whirlpool Corporation (NYSE:WHR) was in 26 hedge funds’ portfolios at the end of the second quarter of 2020. The all time high for this statistics is 38. Our calculations also showed that WHR isn’t among the 30 most popular stocks among hedge funds (click for Q2 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.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? 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 S&P 500 ETFs by more than 56 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 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. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, legal marijuana is one of the fastest growing industries right now, so we are checking out stock pitches like “the Starbucks of cannabis” to identify the next tenbagger. We go through lists like the 10 most profitable companies in the world to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our website to get excerpts of these letters in your inbox. Now let’s take a glance at the fresh hedge fund action encompassing Whirlpool Corporation (NYSE:WHR).
What does smart money think about Whirlpool Corporation (NYSE:WHR)?
At Q2’s end, a total of 26 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 4% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in WHR over the last 20 quarters. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Greenhaven Associates was the largest shareholder of Whirlpool Corporation (NYSE:WHR), with a stake worth $360 million reported as of the end of September. Trailing Greenhaven Associates was Lyrical Asset Management, which amassed a stake valued at $207.7 million. AQR Capital Management, Arrowstreet Capital, and Markel Gayner Asset 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 Greenhaven Associates allocated the biggest weight to Whirlpool Corporation (NYSE:WHR), around 7.97% of its 13F portfolio. Lyrical Asset Management is also relatively very bullish on the stock, setting aside 4.09 percent of its 13F equity portfolio to WHR.
As one would reasonably expect, key money managers have jumped into Whirlpool Corporation (NYSE:WHR) headfirst. Fairpointe Capital, managed by Thyra Zerhusen, assembled the largest position in Whirlpool Corporation (NYSE:WHR). Fairpointe Capital had $10.4 million invested in the company at the end of the quarter. David Einhorn’s Greenlight Capital also made a $3.7 million investment in the stock during the quarter. The other funds with brand new WHR positions are Jeffrey Gendell’s Tontine Asset Management, Israel Englander’s Millennium Management, and Gavin Saitowitz and Cisco J. del Valle’s Springbok Capital.
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Whirlpool Corporation (NYSE:WHR) but similarly valued. We will take a look at Wynn Resorts, Limited (NASDAQ:WYNN), Guardant Health, Inc. (NASDAQ:GH), Graco Inc. (NYSE:GGG), LKQ Corporation (NASDAQ:LKQ), Entegris Inc (NASDAQ:ENTG), NRG Energy Inc (NYSE:NRG), and Globe Life Inc. (NYSE:GL). All of these stocks’ market caps match WHR’s market cap.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
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As you can see these stocks had an average of 36.3 hedge funds with bullish positions and the average amount invested in these stocks was $786 million. That figure was $800 million in WHR’s case. Wynn Resorts, Limited (NASDAQ:WYNN) is the most popular stock in this table. On the other hand Entegris Inc (NASDAQ:ENTG) is the least popular one with only 28 bullish hedge fund positions. Compared to these stocks Whirlpool Corporation (NYSE:WHR) is even less popular than ENTG. Our overall hedge fund sentiment score for WHR is 20.6. 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. Hedge funds clearly dropped the ball on WHR as the stock delivered strong returns, though hedge funds’ consensus picks still generated respectable returns. 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 21.3% in 2020 through September 25th and still beat the market by 17.7 percentage points. A small number of hedge funds were also right about betting on WHR as the stock returned 38.4% during the third quarter (through September 25th) and outperformed the market by an even larger margin.
Disclosure: None. This article was originally published at Insider Monkey.