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Hedge Funds Never Been Less Bullish On Newell Brands Inc. (NWL)

In this article you are going to find out whether hedge funds think Newell Brands Inc. (NASDAQ:NWL) is a good investment right now. We like to check what the smart money thinks first before doing extensive research on a given stock. Although there have been several high profile failed hedge fund picks, the consensus picks among hedge fund investors have historically outperformed the market after adjusting for known risk attributes. It’s not surprising given that hedge funds have access to better information and more resources to predict the winners in the stock market.

Newell Brands Inc. (NASDAQ:NWL) has seen a decrease in enthusiasm from smart money recently. Our calculations also showed that NWL 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 today’s marketplace there are plenty of indicators shareholders have at their disposal to analyze their holdings. A pair of the less utilized indicators are hedge fund and insider trading moves. Our researchers have shown that, historically, those who follow the best picks of the elite hedge fund managers can outperform the broader indices by a superb margin (see the details here).

Richard Pzena - Pzena Investment Management

Richard S. Pzena of Pzena Investment Management

We leave no stone unturned when looking for the next great investment idea. For example, we believe electric vehicles and energy storage are set to become giant markets, and we want to take advantage of the declining lithium prices amid the COVID-19 pandemic. So we are checking out investment opportunities like these. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Now we’re going to take a peek at the recent hedge fund action encompassing Newell Brands Inc. (NASDAQ:NWL).

What does smart money think about Newell Brands Inc. (NASDAQ:NWL)?

At the end of the first quarter, a total of 24 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -23% from the fourth quarter of 2019. By comparison, 30 hedge funds held shares or bullish call options in NWL a year ago. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

The largest stake in Newell Brands Inc. (NASDAQ:NWL) was held by Icahn Capital LP, which reported holding $580.4 million worth of stock at the end of September. It was followed by Pzena Investment Management with a $340.8 million position. Other investors bullish on the company included Arrowstreet Capital, Citadel Investment Group, and 13D Management. In terms of the portfolio weights assigned to each position Proxima Capital Management allocated the biggest weight to Newell Brands Inc. (NASDAQ:NWL), around 5.43% of its 13F portfolio. 13D Management is also relatively very bullish on the stock, dishing out 3.78 percent of its 13F equity portfolio to NWL.

Seeing as Newell Brands Inc. (NASDAQ:NWL) has experienced declining sentiment from the entirety of the hedge funds we track, it’s easy to see that there was a specific group of funds who sold off their full holdings last quarter. Interestingly, Mark Rachesky’s MHR Fund Management said goodbye to the largest investment of the “upper crust” of funds monitored by Insider Monkey, worth close to $16.3 million in stock. Charles Lemonides’s fund, Valueworks LLC, also dumped its stock, about $6 million worth. These transactions are interesting, as aggregate hedge fund interest dropped by 7 funds last quarter.

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Newell Brands Inc. (NASDAQ:NWL) but similarly valued. These stocks are Bright Horizons Family Solutions Inc (NYSE:BFAM), Sociedad Quimica y Minera de Chile S.A. (NYSE:SQM), Amedisys Inc (NASDAQ:AMED), and The Stars Group Inc. (NASDAQ:TSG). This group of stocks’ market values are closest to NWL’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
BFAM 27 262204 -7
SQM 10 53846 -3
AMED 20 244124 -2
TSG 34 1097115 -11
Average 22.75 414322 -5.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 22.75 hedge funds with bullish positions and the average amount invested in these stocks was $414 million. That figure was $1005 million in NWL’s case. The Stars Group Inc. (NASDAQ:TSG) is the most popular stock in this table. On the other hand Sociedad Quimica y Minera de Chile S.A. (NYSE:SQM) is the least popular one with only 10 bullish hedge fund positions. Newell Brands Inc. (NASDAQ:NWL) is not the most popular stock in this group but hedge fund interest is still above average. 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 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 13.9% in 2020 through June 10th but beat the market by 14.2 percentage points. Unfortunately NWL wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on NWL were disappointed as the stock returned 21.9% during the same time period and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.

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