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Whirlpool Corporation (WHR) vs. Hedge Fund Favorites in 2019

It is already common knowledge that individual investors do not usually have the necessary resources and abilities to properly research an investment opportunity. As a result, most investors pick their illusory “winners” by making a superficial analysis and research that leads to poor performance on aggregate. Since stock returns aren’t usually symmetrically distributed and index returns are more affected by a few outlier stocks (i.e. the FAANG stocks dominating and driving S&P 500 Index’s returns in recent years), more than 50% of the constituents of the Standard and Poor’s 500 Index underperform the benchmark. Hence, if you randomly pick a stock, there is more than 50% chance that you’d fail to beat the market. At the same time, the 20 most favored S&P 500 stocks by the hedge funds monitored by Insider Monkey generated an outperformance of more than 10 percentage points so far in 2019. Of course, hedge funds do make wrong bets on some occasions and these get disproportionately publicized on financial media, but piggybacking their moves can beat the broader market on average. That’s why we are going to go over recent hedge fund activity in Whirlpool Corporation (NYSE:WHR).

Whirlpool Corporation (NYSE:WHR) investors should pay attention to an increase in support from the world’s most elite money managers recently. WHR was in 28 hedge funds’ portfolios at the end of September. There were 19 hedge funds in our database with WHR positions at the end of the previous quarter. Our calculations also showed that WHR isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video at the end of this article for Q2 rankings).

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’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the Russell 2000 ETFs by 40 percentage points since May 2014 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 27.8% through November 21, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Tom Gayner

Tom Gayner of Markel Gayner Asset Management

We leave no stone unturned when looking for the next great investment idea. For example one of the most bullish analysts in America just put his money where his mouth is. He says, “I’m investing more today than I did back in early 2009.” So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. This December, we recommended Adams Energy as a one-way bet based on an under-the-radar fund manager’s investor letter and the stock is still extremely cheap despite already gaining 20 percent. Keeping this in mind let’s take a look at the recent hedge fund action encompassing Whirlpool Corporation (NYSE:WHR).

How are hedge funds trading Whirlpool Corporation (NYSE:WHR)?

At the end of the third quarter, a total of 28 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 47% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards WHR over the last 17 quarters. With hedge funds’ sentiment swirling, there exists a select group of notable hedge fund managers who were increasing their holdings significantly (or already accumulated large positions).

The largest stake in Whirlpool Corporation (NYSE:WHR) was held by Greenhaven Associates, which reported holding $446.1 million worth of stock at the end of September. It was followed by Lyrical Asset Management with a $263.5 million position. Other investors bullish on the company included Marshall Wace, Markel Gayner Asset Management, and AQR Capital Management. In terms of the portfolio weights assigned to each position Greenhaven Associates allocated the biggest weight to Whirlpool Corporation (NYSE:WHR), around 9.02% of its 13F portfolio. Albar Capital is also relatively very bullish on the stock, dishing out 4.9 percent of its 13F equity portfolio to WHR.

As aggregate interest increased, some big names were leading the bulls’ herd. Citadel Investment Group, managed by Ken Griffin, assembled the biggest position in Whirlpool Corporation (NYSE:WHR). Citadel Investment Group had $17.2 million invested in the company at the end of the quarter. Javier Velazquez’s Albar Capital also initiated a $10.7 million position during the quarter. The other funds with new positions in the stock are Ken Heebner’s Capital Growth Management, Renaissance Technologies, and Benjamin A. Smith’s Laurion Capital Management.

Let’s now review 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 Packaging Corporation Of America (NYSE:PKG), Reinsurance Group of America Incorporated (NYSE:RGA), PulteGroup, Inc. (NYSE:PHM), and NRG Energy Inc (NYSE:NRG). This group of stocks’ market values resemble WHR’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
PKG 16 119433 -5
RGA 25 476554 -1
PHM 28 826294 -3
NRG 46 1482443 4
Average 28.75 726181 -1.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 28.75 hedge funds with bullish positions and the average amount invested in these stocks was $726 million. That figure was $979 million in WHR’s case. NRG Energy Inc (NYSE:NRG) is the most popular stock in this table. On the other hand Packaging Corporation Of America (NYSE:PKG) is the least popular one with only 16 bullish hedge fund positions. Whirlpool Corporation (NYSE:WHR) is not the least popular stock in this group but hedge fund interest is still below average. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.1% in 2019 through December 23rd and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. A small number of hedge funds were also right about betting on WHR, though not to the same extent, as the stock returned 40.8% in 2019 (as of 12/23) and outperformed the market.
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

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

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