Hedge Funds Are Crazy About Southwest Gas Holdings, Inc. (SWX)

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 Southwest Gas Holdings, Inc. (NYSE:SWX).

Southwest Gas Holdings, Inc. (NYSE:SWX) investors should be aware of an increase in hedge fund interest of late. Southwest Gas Holdings, Inc. (NYSE:SWX) was in 23 hedge funds’ portfolios at the end of March. The all time high for this statistic is 23. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that SWX isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings).

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.


Cliff Asness of AQR Capital Management

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, Chuck Schumer recently stated that marijuana legalization will be a Senate priority. So, we are checking out this under the radar stock that will benefit from this. We go through lists like the 10 best battery 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 let’s take a peek at the new hedge fund action encompassing Southwest Gas Holdings, Inc. (NYSE:SWX).

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

At Q1’s end, a total of 23 of the hedge funds tracked by Insider Monkey were long this stock, a change of 35% from the fourth quarter of 2020. By comparison, 13 hedge funds held shares or bullish call options in SWX a year ago. With hedgies’ sentiment swirling, there exists a few key hedge fund managers who were boosting their holdings substantially (or already accumulated large positions).

Of the funds tracked by Insider Monkey, GAMCO Investors, managed by Mario Gabelli, holds the number one position in Southwest Gas Holdings, Inc. (NYSE:SWX). GAMCO Investors has a $46.1 million position in the stock, comprising 0.4% of its 13F portfolio. Coming in second is Cliff Asness of AQR Capital Management, with a $24.5 million position; less than 0.1%% of its 13F portfolio is allocated to the company. Other peers that hold long positions comprise Frank Fu’s CaaS Capital, Israel Englander’s Millennium Management and Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital. In terms of the portfolio weights assigned to each position Coann Capital allocated the biggest weight to Southwest Gas Holdings, Inc. (NYSE:SWX), around 4.81% of its 13F portfolio. GAMCO Investors is also relatively very bullish on the stock, designating 0.4 percent of its 13F equity portfolio to SWX.

As industrywide interest jumped, specific money managers have been driving this bullishness. CaaS Capital, managed by Frank Fu, initiated the most outsized position in Southwest Gas Holdings, Inc. (NYSE:SWX). CaaS Capital had $24.4 million invested in the company at the end of the quarter. Matthew Davis’s Coann Capital also initiated a $5.7 million position during the quarter. The other funds with brand new SWX positions are Brandon Haley’s Holocene Advisors, Michael Gelband’s ExodusPoint Capital, and Jinghua Yan’s TwinBeech Capital.

Let’s go over hedge fund activity in other stocks similar to Southwest Gas Holdings, Inc. (NYSE:SWX). These stocks are Colliers International Group Inc (NASDAQ:CIGI), AllianceBernstein Holding LP (NYSE:AB), Rapid7 Inc (NASDAQ:RPD), Switch, Inc. (NYSE:SWCH), Carter’s, Inc. (NYSE:CRI), Hayward Holdings, Inc. (NYSE:HAYW), and Envestnet Inc (NYSE:ENV). This group of stocks’ market values are similar to SWX’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
CIGI 14 866464 3
AB 8 40384 -1
RPD 25 151718 4
SWCH 10 187483 -8
CRI 27 265128 2
HAYW 25 209769 25
ENV 18 210832 -10
Average 18.1 275968 2.1

View table here if you experience formatting issues.

As you can see these stocks had an average of 18.1 hedge funds with bullish positions and the average amount invested in these stocks was $276 million. That figure was $160 million in SWX’s case. Carter’s, Inc. (NYSE:CRI) is the most popular stock in this table. On the other hand AllianceBernstein Holding LP (NYSE:AB) is the least popular one with only 8 bullish hedge fund positions. Southwest Gas Holdings, Inc. (NYSE:SWX) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for SWX is 79.5. 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 positive signal but 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 23.8% in 2021 through July 16th and beat the market again by 7.7 percentage points. Unfortunately SWX wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on SWX were disappointed as the stock returned 4.3% since the end of March (through 7/16) 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 many of these stocks already outperformed the market since 2019.

Follow Southwest Gas Holdings Inc. (NYSE:SWX)

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