Were Hedge Funds Right About Betting On Williams Companies, Inc. (WMB)?

Insider Monkey has processed numerous 13F filings of hedge funds and successful value investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds’ and successful investors’ positions as of the end of the first quarter. You can find articles about an individual hedge fund’s trades on numerous financial news websites. However, in this article we will take a look at their collective moves over the last 4.5 years and analyze what the smart money thinks of Williams Companies, Inc. (NYSE:WMB) based on that data and determine whether they were really smart about the stock.

Williams Companies, Inc. (NYSE:WMB) shareholders have witnessed an increase in hedge fund sentiment in recent months. WMB was in 47 hedge funds’ portfolios at the end of the first quarter of 2020. There were 40 hedge funds in our database with WMB positions at the end of the previous quarter. Our calculations also showed that WMB 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.

To the average investor there are several signals investors have at their disposal to grade their stock investments. A couple of the most innovative signals are hedge fund and insider trading sentiment. Our researchers have shown that, historically, those who follow the top picks of the elite fund managers can beat the market by a healthy margin (see the details here).

Donald Sussman Paloma Partners

Donald Sussman of Paloma Partners

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, this trader claims to score lucrative profits by utilizing a “weekend trading strategy”, so we look into his strategy’s picks. 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 gold prices. So, we are checking out this junior gold mining stock. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We recently recommended several stocks partly inspired by legendary Bill Miller’s investor letter. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 in February after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind we’re going to check out the fresh hedge fund action regarding Williams Companies, Inc. (NYSE:WMB).

How are hedge funds trading Williams Companies, Inc. (NYSE:WMB)?

At the end of the first quarter, a total of 47 of the hedge funds tracked by Insider Monkey were long this stock, a change of 18% from the fourth quarter of 2019. The graph below displays the number of hedge funds with bullish position in WMB over the last 18 quarters. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Is WMB A Good Stock To Buy?

According to Insider Monkey’s hedge fund database, Southeastern Asset Management, managed by Mason Hawkins, holds the number one position in Williams Companies, Inc. (NYSE:WMB). Southeastern Asset Management has a $191.6 million position in the stock, comprising 4.6% of its 13F portfolio. The second most bullish fund manager is Levin Easterly Partners, managed by John Murphy, which holds a $48.6 million position; the fund has 2.2% of its 13F portfolio invested in the stock. Some other members of the smart money with similar optimism consist of Israel Englander’s Millennium Management, Dmitry Balyasny’s Balyasny Asset Management and Steven Tananbaum’s GoldenTree Asset Management. In terms of the portfolio weights assigned to each position Heronetta Management allocated the biggest weight to Williams Companies, Inc. (NYSE:WMB), around 5.9% of its 13F portfolio. Southeastern Asset Management is also relatively very bullish on the stock, setting aside 4.56 percent of its 13F equity portfolio to WMB.

As aggregate interest increased, specific money managers were leading the bulls’ herd. GoldenTree Asset Management, managed by Steven Tananbaum, initiated the most outsized position in Williams Companies, Inc. (NYSE:WMB). GoldenTree Asset Management had $22.2 million invested in the company at the end of the quarter. Jonathan Kolatch’s Redwood Capital Management also made a $20.9 million investment in the stock during the quarter. The following funds were also among the new WMB investors: Steve Cohen’s Point72 Asset Management, Phill Gross and Robert Atchinson’s Adage Capital Management, and Howard Marks’s Oaktree Capital Management.

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Williams Companies, Inc. (NYSE:WMB) but similarly valued. These stocks are Realty Income Corporation (NYSE:O), New Oriental Education & Technology Group Inc. (NYSE:EDU), Coca-Cola European Partners plc (NYSE:CCEP), and Snap Inc. (NYSE:SNAP). This group of stocks’ market valuations match WMB’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
O 25 225190 -1
EDU 42 1555475 -8
CCEP 22 185913 1
SNAP 48 929814 -18
Average 34.25 724098 -6.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 34.25 hedge funds with bullish positions and the average amount invested in these stocks was $724 million. That figure was $553 million in WMB’s case. Snap Inc. (NYSE:SNAP) is the most popular stock in this table. On the other hand Coca-Cola European Partners plc (NYSE:CCEP) is the least popular one with only 22 bullish hedge fund positions. Williams Companies, Inc. (NYSE:WMB) is not the most popular stock in this group but hedge fund interest is still above average. 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 12.3% in 2020 through June 30th but still beat the market by 15.5 percentage points. Hedge funds were also right about betting on WMB as the stock returned 37.1% in Q2 and outperformed the market. Hedge funds were rewarded for their relative bullishness.

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