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Do Hedge Funds Love Middlesex Water Company (MSEX)?

Before we spend days researching a stock idea we’d like to take a look at how hedge funds and billionaire investors recently traded that stock. S&P 500 Index returned about 5.2% during the last 12 months ending October 30, 2015. Less than 49% of the stocks in the index outperformed the index. This means you (or a monkey throwing a dart) have less than an even chance of beating the market by randomly picking a stock. On the other hand, the top 30 S&P 500 stocks among hedge funds at the end of September 2014 had an average return of 9.5% during the same period. Sixty three percent of these 30 stocks outperformed the market. Hedge funds had bad stock picks like everyone else. Micron, which lost 50% over this period, was one of hedge funds’ 30 favorite S&P 500 stocks. Anadarko Petroleum was another failed stock pick which lost more than 26%. So, taking cues from hedge funds isn’t a foolproof strategy, but it seems to work on average. In this article, we will take a look at what hedge funds think about Middlesex Water Company (NASDAQ:MSEX).

Middlesex Water Company (NASDAQ:MSEX) has experienced an increase in hedge fund sentiment lately. Middlesex Water Company (NASDAQ:MSEX) was in 7 hedge funds’ portfolios at the end of the third quarter of 2015. There were 6 hedge funds in our database with Middlesex Water Company (NASDAQ:MSEX) holdings at the end of the previous quarter. The market was equally optimistic, with the shares of Middlesex Water Company gaining 5.67% value throughout the quarter.

Understanding hedge fund moves is a difficult process, considering the degree of analysis behind their every single move; so, we’ll try to find out more about the hedge funds having stake in Middlesex Water Company (NASDAQ:MSEX) at the end of the previous quarter. At the end of this article, we will also compare Middlesex Water Company (NASDAQ:MSEX) to other stocks, including Bellicum Pharmaceuticals Inc (NASDAQ:BLCM), Ruby Tuesday, Inc. (NYSE:RT), and Peabody Energy Corporation (NYSE:BTU) to get a better sense of its popularity.

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In the 21st century investor’s toolkit, there are tons of tools shareholders employ to assess publicly traded companies. Two of the most underrated tools are hedge fund and insider trading moves. We have shown that, historically, those who follow the top picks of the elite investment managers can trounce the market by a significant amount (see the details here).

Keeping this in mind, we’re going to take a glance at the key action encompassing Middlesex Water Company (NASDAQ:MSEX).

How are hedge funds trading Middlesex Water Company (NASDAQ:MSEX)?

Heading into Q4, a total of 7 of the hedge funds tracked by Insider Monkey were bullish on this stock, an increase of 17% from the second quarter. With the smart money’s positions undergoing their usual ebb and flow, there exists a few notable hedge fund managers who were boosting their holdings considerably (or already accumulated large positions).

According to Insider Monkey’s hedge fund database, Renaissance Technologies holds the number one position in Middlesex Water Company (NASDAQ:MSEX). Renaissance Technologies has a $7.4 million position in the stock, comprising less than 0.1% of its 13F portfolio. Sitting at the No. 2 spot is GAMCO Investors, managed by Mario Gabelli, which holds a $1.8 million position; the fund has less than 0.1% of its 13F portfolio invested in the stock. Other professional money managers that hold long positions consist of Israel Englander’s Millennium Management, John Overdeck and David Siegel’s Two Sigma Advisors, and Ken Griffin’s Citadel Investment Group.

Consequently, some big names have jumped into Middlesex Water Company (NASDAQ:MSEX) headfirst. Citadel Investment Group established the most outsized position in Middlesex Water Company (NASDAQ:MSEX). Citadel Investment Group had $0.3 million invested in the company at the end of the quarter.

Let’s now review hedge fund activity in other stocks similar to Middlesex Water Company (NASDAQ:MSEX). These stocks are Bellicum Pharmaceuticals Inc (NASDAQ:BLCM), Ruby Tuesday, Inc. (NYSE:RT), Peabody Energy Corporation (NYSE:BTU), and OFG Bancorp (NYSE:OFG). All of these stocks’ market caps match Middlesex Water Company (NASDAQ:MSEX)’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
BLCM 15 117063 0
RT 20 47481 1
BTU 16 57841 -11
OFG 13 30883 -2

As you can see, these stocks had an average of 16 hedge funds with bullish positions and the average amount invested in these stocks was $63 million. That figure was $11 million in Middlesex Water Company (NASDAQ:MSEX)’s case. Ruby Tuesday, Inc. (NYSE:RT) is the most popular stock in this table. On the other hand, OFG Bancorp (NYSE:OFG) is the least popular one with only 13 bullish hedge fund positions. Compared to these stocks, Middlesex Water Company (NASDAQ:MSEX) is even less popular than OFG Bancorp (NYSE:OFG). Considering that hedge funds aren’t fond of this stock in relation to other companies analyzed in this article, it may be a good idea to analyze it in detail and understand why the smart money isn’t behind this stock. This isn’t necessarily bad news. Although it is possible that hedge funds may think the stock is overpriced and view the stock as a short candidate, they may not be very familiar with the bullish thesis. In either case, more research is warranted.

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