Williams-Sonoma, Inc. (WSM): Hedge Funds Are Taking A Breather

After several tireless days we have finished crunching the numbers from nearly 900 13F filings issued by the elite hedge funds and other investment firms that we track at Insider Monkey, which disclosed those firms’ equity portfolios as of March 31st. The results of that effort will be put on display in this article, as we share valuable insight into the smart money sentiment towards Williams-Sonoma, Inc. (NYSE:WSM).

Hedge fund interest in Williams-Sonoma, Inc. (NYSE:WSM) shares was flat at the end of last quarter. This is usually a negative indicator. Our calculations also showed that WSM isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings). At the end of this article we will also compare WSM to other stocks including WestRock Company (NYSE:WRK), Loews Corporation (NYSE:L), and NICE Ltd (NASDAQ:NICE) to get a better sense of its popularity.

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 115 percentage points since March 2017 (see the details here). That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

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At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. We go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. 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 homepage. Keeping this in mind we’re going to review the new hedge fund action encompassing Williams-Sonoma, Inc. (NYSE:WSM).

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

At the end of the first quarter, a total of 29 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 0% from the previous quarter. The graph below displays the number of hedge funds with bullish position in WSM over the last 23 quarters. With hedgies’ capital changing hands, there exists a few key hedge fund managers who were increasing their holdings significantly (or already accumulated large positions).

Is WSM A Good Stock To Buy?

More specifically, Select Equity Group was the largest shareholder of Williams-Sonoma, Inc. (NYSE:WSM), with a stake worth $364.4 million reported as of the end of March. Trailing Select Equity Group was AQR Capital Management, which amassed a stake valued at $71.4 million. Arrowstreet Capital, ThornTree Capital Partners, and Citadel Investment Group 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 0 allocated the biggest weight to Williams-Sonoma, Inc. (NYSE:WSM), around 6.54% of its 13F portfolio. 0 is also relatively very bullish on the stock, dishing out 6.29 percent of its 13F equity portfolio to WSM.

Due to the fact that Williams-Sonoma, Inc. (NYSE:WSM) has faced falling interest from hedge fund managers, it’s easy to see that there exists a select few hedgies that slashed their entire stakes in the first quarter. Intriguingly, Dmitry Balyasny’s Balyasny Asset Management dropped the largest investment of the 750 funds tracked by Insider Monkey, comprising an estimated $21.4 million in stock, and Alec Litowitz and Ross Laser’s Magnetar Capital was right behind this move, as the fund sold off about $0.9 million worth. These transactions are important to note, as total hedge fund interest stayed the same (this is a bearish signal in our experience).

Let’s now review hedge fund activity in other stocks similar to Williams-Sonoma, Inc. (NYSE:WSM). We will take a look at WestRock Company (NYSE:WRK), Loews Corporation (NYSE:L), NICE Ltd (NASDAQ:NICE), Molina Healthcare, Inc. (NYSE:MOH), The Scotts Miracle-Gro Company (NYSE:SMG), Dynatrace, Inc. (NYSE:DT), and Leidos Holdings Inc (NYSE:LDOS). This group of stocks’ market valuations resemble WSM’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
WRK 27 580223 -16
L 21 200364 2
NICE 33 868132 7
MOH 31 1561071 4
SMG 34 445170 5
DT 52 1638106 -1
LDOS 18 93802 4
Average 30.9 769553 0.7

View table here if you experience formatting issues.

As you can see these stocks had an average of 30.9 hedge funds with bullish positions and the average amount invested in these stocks was $770 million. That figure was $758 million in WSM’s case. Dynatrace, Inc. (NYSE:DT) is the most popular stock in this table. On the other hand Leidos Holdings Inc (NYSE:LDOS) is the least popular one with only 18 bullish hedge fund positions. Williams-Sonoma, Inc. (NYSE:WSM) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for WSM is 49.2. 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. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 22.8% in 2021 through July 2nd and surpassed the market again by 6 percentage points. Unfortunately WSM wasn’t nearly as popular as these 5 stocks (hedge fund sentiment was quite bearish); WSM investors were disappointed as the stock returned -9.5% since the end of March (through 7/2) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2021.

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