Should I Buy Schweitzer-Mauduit International, Inc. (SWM)?

Many prominent investors, including Warren Buffett, David Tepper and Stan Druckenmiller, have been cautious regarding the current bull market and missed out as the stock market reached another high in recent weeks. On the other hand, technology hedge funds weren’t timid and registered double digit market beating gains. Financials, energy and industrial stocks aren’t doing great but many of the stocks that delivered strong returns since March are still going very strong and hedge funds actually increased their positions in these stocks. In this article we will find out how hedge fund sentiment to Schweitzer-Mauduit International, Inc. (NYSE:SWM) changed recently.

Schweitzer-Mauduit International, Inc. (NYSE:SWM) has seen an increase in support from the world’s most elite money managers recently. Schweitzer-Mauduit International, Inc. (NYSE:SWM) was in 11 hedge funds’ portfolios at the end of September. The all time high for this statistics is 18. Our calculations also showed that SWM isn’t among the 30 most popular stocks among hedge funds (click for Q3 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.

According to most stock holders, hedge funds are viewed as underperforming, old financial vehicles of years past. While there are over 8000 funds trading today, Our researchers hone in on the upper echelon of this group, about 850 funds. These hedge fund managers administer most of the smart money’s total asset base, and by keeping an eye on their highest performing investments, Insider Monkey has figured out numerous investment strategies that have historically outrun Mr. Market. Insider Monkey’s flagship short hedge fund strategy outrun the S&P 500 short ETFs by around 20 percentage points annually since its inception in March 2017. Our portfolio of short stocks lost 13% since February 2017 (through November 17th) even though the market was up 65% during the same period. We just shared a list of 6 short targets in our latest quarterly update .

RENAISSANCE TECHNOLOGIES

Jim Simons founder of Renaissance Technologies

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 15 best blue chip stocks 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. Keeping this in mind we’re going to check out the recent hedge fund action surrounding Schweitzer-Mauduit International, Inc. (NYSE:SWM).

Do Hedge Funds Think SWM Is A Good Stock To Buy Now?

At third quarter’s end, a total of 11 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 22% from the second quarter of 2020. Below, you can check out the change in hedge fund sentiment towards SWM over the last 21 quarters. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

More specifically, Renaissance Technologies was the largest shareholder of Schweitzer-Mauduit International, Inc. (NYSE:SWM), with a stake worth $5.6 million reported as of the end of September. Trailing Renaissance Technologies was Arrowstreet Capital, which amassed a stake valued at $4.7 million. Millennium Management, Harvey Partners, and Royce & Associates 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 Harvey Partners allocated the biggest weight to Schweitzer-Mauduit International, Inc. (NYSE:SWM), around 1.58% of its 13F portfolio. AlphaCrest Capital Management is also relatively very bullish on the stock, designating 0.02 percent of its 13F equity portfolio to SWM.

As one would reasonably expect, some big names have been driving this bullishness. Arrowstreet Capital, managed by Peter Rathjens, Bruce Clarke and John Campbell, assembled the most outsized position in Schweitzer-Mauduit International, Inc. (NYSE:SWM). Arrowstreet Capital had $4.7 million invested in the company at the end of the quarter. Jeffrey Moskowitz’s Harvey Partners also made a $1.2 million investment in the stock during the quarter. The other funds with new positions in the stock are Donald Sussman’s Paloma Partners and Mika Toikka’s AlphaCrest Capital Management.

Let’s now take a look at hedge fund activity in other stocks similar to Schweitzer-Mauduit International, Inc. (NYSE:SWM). These stocks are Construction Partners, Inc. (NASDAQ:ROAD), Vocera Communications Inc (NYSE:VCRA), PetIQ, Inc. (NASDAQ:PETQ), Retrophin Inc (NASDAQ:RTRX), Phathom Pharmaceuticals, Inc. (NASDAQ:PHAT), Theravance Biopharma Inc (NASDAQ:TBPH), and Accel Entertainment, Inc. (NYSE:ACEL). All of these stocks’ market caps are similar to SWM’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
ROAD 11 35881 1
VCRA 18 181990 3
PETQ 13 132362 -3
RTRX 24 370363 -2
PHAT 6 375079 1
TBPH 17 291643 -1
ACEL 19 180025 3
Average 15.4 223906 0.3

View table here if you experience formatting issues.

As you can see these stocks had an average of 15.4 hedge funds with bullish positions and the average amount invested in these stocks was $224 million. That figure was $16 million in SWM’s case. Retrophin Inc (NASDAQ:RTRX) is the most popular stock in this table. On the other hand Phathom Pharmaceuticals, Inc. (NASDAQ:PHAT) is the least popular one with only 6 bullish hedge fund positions. Schweitzer-Mauduit International, Inc. (NYSE:SWM) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for SWM is 39.2. 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. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 32.9% in 2020 through December 8th and still beat the market by 16.2 percentage points. A small number of hedge funds were also right about betting on SWM as the stock returned 21.2% since the end of the third quarter (through 12/8) and outperformed the market by an even larger margin.

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