Here is What Hedge Funds Think About Williams-Sonoma, Inc. (WSM)

Looking for stocks with high upside potential? Just follow the big players within the hedge fund industry. Why should you do so? Let’s take a brief look at what statistics have to say about hedge funds’ stock picking abilities to illustrate. The Standard and Poor’s 500 Index returned approximately 5.7% in the 12 months ending October 26 (including dividend payments). Conversely, hedge funds’ 30 preferred S&P 500 stocks (as of June 2014) generated a return of 15.1% during the same 12-month period, with 53% of these stock picks outperforming the broader market benchmark. Coincidence? It might happen to be so, but it is unlikely. Our research covering the last 18 years indicates that hedge funds’ stock picks generate superior risk-adjusted returns. That’s why we believe it is wise to check hedge fund activity before you invest your time or your savings on a stock like Williams-Sonoma, Inc. (NYSE:WSM).

Williams-Sonoma, Inc. (NYSE:WSM) has experienced an increase in hedge fund interest recently. Our calculations also showed that WSM isn’t among the 30 most popular stocks among hedge funds.

Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. 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 market by 18 percentage points since May 2014 through December 3, 2018 (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.


We’re going to review the new hedge fund action regarding Williams-Sonoma, Inc. (NYSE:WSM).

What does the smart money think about Williams-Sonoma, Inc. (NYSE:WSM)?

At the end of the third quarter, a total of 23 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 5% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards WSM over the last 13 quarters. With hedgies’ capital changing hands, there exists an “upper tier” of noteworthy hedge fund managers who were boosting their stakes meaningfully (or already accumulated large positions).


Among these funds, Select Equity Group held the most valuable stake in Williams-Sonoma, Inc. (NYSE:WSM), which was worth $237 million at the end of the third quarter. On the second spot was AQR Capital Management which amassed $177.7 million worth of shares. Moreover, Renaissance Technologies, D E Shaw, and Two Sigma Advisors were also bullish on Williams-Sonoma, Inc. (NYSE:WSM), allocating a large percentage of their portfolios to this stock.

As industrywide interest jumped, specific money managers were leading the bulls’ herd. Impax Asset Management, managed by Ian Simm, created the biggest position in Williams-Sonoma, Inc. (NYSE:WSM). Impax Asset Management had $8.3 million invested in the company at the end of the quarter. Lee Ainslie’s Maverick Capital also made a $4.9 million investment in the stock during the quarter. The other funds with brand new WSM positions are Paul Tudor Jones’s Tudor Investment Corp, Frank Slattery’s Symmetry Peak Management, and Guy Shahar’s DSAM Partners.

Let’s now review hedge fund activity in other stocks similar to Williams-Sonoma, Inc. (NYSE:WSM). These stocks are Exelixis, Inc. (NASDAQ:EXEL), Janus Henderson Group plc (NYSE:JHG), Centrais Elétricas Brasileiras S.A. – Eletrobras (NYSE:EBR), and Marriott Vacations Worldwide Corporation (NYSE:VAC). All of these stocks’ market caps are closest to WSM’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
EXEL 23 679477 -1
JHG 17 183270 4
EBR 4 4967 1
VAC 32 578468 12
Average 19 361546 4

View table here if you experience formatting issues.

As you can see these stocks had an average of 19 hedge funds with bullish positions and the average amount invested in these stocks was $362 million. That figure was $561 million in WSM’s case. Marriott Vacations Worldwide Corporation (NYSE:VAC) is the most popular stock in this table. On the other hand Centrais Eletricas Brasileiras SA (NYSE:EBR) is the least popular one with only 4 bullish hedge fund positions. Williams-Sonoma, Inc. (NYSE:WSM) 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. In this regard VAC might be a better candidate to consider a long position.

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