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Hedge Funds Bailed Out Of Whirlpool Corporation (WHR) At The Wrong Time?

During the fourth quarter the Russell 2000 ETF (IWM) lagged the larger S&P 500 ETF (SPY) by nearly 7 percentage points as investors worried over the possible ramifications of rising interest rates. The hedge funds and institutional investors we track typically invest more in smaller-cap stocks than an average investor (i.e. only 298 S&P 500 constituents were among the 500 most popular stocks among hedge funds), and we have seen data that shows those funds paring back their overall exposure. Those funds cutting positions in small-caps is one reason why volatility has increased. In the following paragraphs, we take a closer look at what hedge funds and prominent investors think of Whirlpool Corporation (NYSE:WHR) and see how the stock is affected by the recent hedge fund activity.

Is Whirlpool Corporation (NYSE:WHR) worth your attention right now? Hedge funds are turning less bullish. The number of bullish hedge fund positions dropped by 3 lately. The overall trend in hedge fund sentiment towards WHR has been negative since the first quarter of 2016. Our calculations also showed that WHR isn’t among the 30 most popular stocks among hedge funds.

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 flagship best performing hedge funds strategy returned 20.7% year to date (through March 12th) and outperformed the market even though it draws its stock picks among small-cap stocks. This strategy also outperformed the market by 32 percentage points since its inception (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

BRIDGEWATER ASSOCIATES

We’re going to analyze the new hedge fund action regarding Whirlpool Corporation (NYSE:WHR).

Hedge fund activity in Whirlpool Corporation (NYSE:WHR)

At the end of the fourth quarter, a total of 20 of the hedge funds tracked by Insider Monkey were long this stock, a change of -13% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in WHR over the last 14 quarters. With the smart money’s capital changing hands, there exists an “upper tier” of noteworthy hedge fund managers who were boosting their holdings substantially (or already accumulated large positions).

WHR

The largest stake in Whirlpool Corporation (NYSE:WHR) was held by Greenhaven Associates, which reported holding $302.9 million worth of stock at the end of September. It was followed by Millennium Management with a $59.6 million position. Other investors bullish on the company included Roystone Capital Partners, Bridgewater Associates, and Citadel Investment Group.

Seeing as Whirlpool Corporation (NYSE:WHR) has witnessed declining sentiment from the smart money, it’s easy to see that there exists a select few hedge funds who were dropping their positions entirely by the end of the third quarter. Intriguingly, Ken Griffin’s Citadel Investment Group said goodbye to the largest investment of the 700 funds followed by Insider Monkey, valued at close to $32.6 million in stock. Phill Gross and Robert Atchinson’s fund, Adage Capital Management, also said goodbye to its stock, about $9.9 million worth. These moves are important to note, as total hedge fund interest was cut by 3 funds by the end of the third quarter.

Let’s check out 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 SCANA Corporation (NYSE:SCG), Wabtec Corporation (NYSE:WAB), News Corp (NASDAQ:NWS), and SL Green Realty Corp (NYSE:SLG). This group of stocks’ market caps are closest to WHR’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
SCG 29 897599 -1
WAB 10 468295 -8
NWS 13 72350 3
SLG 22 150197 4
Average 18.5 397110 -0.5

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 $397 million. That figure was $475 million in WHR’s case. SCANA Corporation (NYSE:SCG) is the most popular stock in this table. On the other hand Wabtec Corporation (NYSE:WAB) is the least popular one with only 10 bullish hedge fund positions. Whirlpool Corporation (NYSE:WHR) is not the most popular stock in this group but hedge fund interest is still above average. Our calculations showed that top 15 most popular stocks among hedge funds returned 21.3% through April 8th and outperformed the S&P 500 ETF (SPY) by more than 5 percentage points. Hedge funds were also right about betting on WHR as the stock returned 30.1% and outperformed the market as well.

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

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