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Waters Corporation (WAT): Hedge Funds and Insiders Are Bearish, What Should You Do? – Trimble Navigation Limited (TRMB), Garmin Ltd. (GRMN)

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Is Waters Corporation (NYSE:WAT) a worthy investment now? The smart money is in a pessimistic mood. The number of bullish hedge fund positions decreased by 2 lately.

To most investors, hedge funds are assumed to be underperforming, old financial vehicles of yesteryear. While there are greater than 8000 funds in operation at present, we at Insider Monkey hone in on the leaders of this group, around 450 funds. It is estimated that this group has its hands on most of the hedge fund industry’s total capital, and by keeping an eye on their best investments, we have spotted a number of investment strategies that have historically outperformed the S&P 500 index. Our small-cap hedge fund strategy beat the S&P 500 index by 18 percentage points per annum for a decade in our back tests, and since we’ve started sharing our picks with our subscribers at the end of August 2012, we have trumped the S&P 500 index by 24 percentage points in 7 months (explore the details and some picks here).

Waters Corporation (NYSE:WAT)

Just as key, optimistic insider trading sentiment is a second way to parse down the stock market universe. Just as you’d expect, there are a number of incentives for an executive to sell shares of his or her company, but only one, very obvious reason why they would buy. Several academic studies have demonstrated the valuable potential of this method if shareholders understand where to look (learn more here).

Keeping this in mind, it’s important to take a gander at the key action encompassing Waters Corporation (NYSE:WAT).

Hedge fund activity in Waters Corporation (NYSE:WAT)

At the end of the fourth quarter, a total of 13 of the hedge funds we track were long in this stock, a change of -13% from the previous quarter. With the smart money’s sentiment swirling, there exists a select group of noteworthy hedge fund managers who were boosting their stakes considerably.

When looking at the hedgies we track, David Blood and Al Gore’s Generation Investment Management had the most valuable position in Waters Corporation (NYSE:WAT), worth close to $298.3 million, comprising 7% of its total 13F portfolio. Coming in second is William von Mueffling of Cantillon Capital Management, with a $92.7 million position; 3.5% of its 13F portfolio is allocated to the stock. Other hedge funds with similar optimism include Phill Gross and Robert Atchinson’s Adage Capital Management, Jim Simons’s Renaissance Technologies and Bruce Kovner’s Caxton Associates LP.

Because Waters Corporation (NYSE:WAT) has faced falling interest from hedge fund managers, we can see that there was a specific group of money managers that slashed their full holdings heading into 2013. Interestingly, David Harding’s Winton Capital Management dumped the largest stake of the “upper crust” of funds we monitor, worth about $2.2 million in stock., and Israel Englander of Millennium Management was right behind this move, as the fund dumped about $1.5 million worth. These transactions are interesting, as total hedge fund interest fell by 2 funds heading into 2013.

How have insiders been trading Waters Corporation (NYSE:WAT)?

Insider trading activity, especially when it’s bullish, is most useful when the company in question has seen transactions within the past six months. Over the latest six-month time frame, Waters Corporation (NYSE:WAT) has experienced zero unique insiders purchasing, and 2 insider sales (see the details of insider trades here).

Let’s also review hedge fund and insider activity in other stocks similar to Waters Corporation (NYSE:WAT). These stocks are Bio-Rad Laboratories, Inc. (NYSE:BIO), Compagnie Generale de Gephysqu Vrts SA (NYSE:CGG), Sensata Technologies Holding N.V. (NYSE:ST), Garmin Ltd. (NASDAQ:GRMN), and Trimble Navigation Limited (NASDAQ:TRMB). This group of stocks belong to the scientific & technical instruments industry and their market caps are similar to WAT’s market cap.

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