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Hedge Funds Are Dumping California Water Service Group (CWT)

We at Insider Monkey have gone over 821 13F filings that hedge funds and prominent investors are required to file by the SEC The 13F filings show the funds’ and investors’ portfolio positions as of March 31st, near the height of the coronavirus market crash. In this article, we look at what those funds think of California Water Service Group (NYSE:CWT) based on that data.

Is California Water Service Group (NYSE:CWT) a bargain? The smart money is taking a bearish view. The number of long hedge fund bets dropped by 4 lately. Our calculations also showed that CWT isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks). CWT was in 16 hedge funds’ portfolios at the end of the first quarter of 2020. There were 20 hedge funds in our database with CWT positions at the end of the previous quarter.

Video: Watch our video about the top 5 most popular hedge fund stocks.

If you’d ask most traders, hedge funds are assumed to be worthless, outdated financial vehicles of yesteryear. While there are greater than 8000 funds with their doors open at present, Our experts look at the top tier of this group, about 850 funds. These hedge fund managers oversee bulk of the smart money’s total capital, and by following their unrivaled investments, Insider Monkey has uncovered many investment strategies that have historically outstripped the broader indices. Insider Monkey’s flagship short hedge fund strategy surpassed the S&P 500 short ETFs by around 20 percentage points per year since its inception in March 2017. Our portfolio of short stocks lost 36% since February 2017 (through May 18th) even though the market was up 30% during the same period. We just shared a list of 8 short targets in our latest quarterly update .

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At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, we take a look at lists like the 10 PayPal alternatives for international payments to identify emerging companies that are likely to deliver 1000% gains in the coming years. We interview hedge fund managers and ask them about their best ideas. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. For example we are checking out stocks recommended/scorned by legendary Bill Miller. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 in February after realizing the coronavirus pandemic’s significance before most investors. Now we’re going to review the recent hedge fund action surrounding California Water Service Group (NYSE:CWT).

What have hedge funds been doing with California Water Service Group (NYSE:CWT)?

At the end of the first quarter, a total of 16 of the hedge funds tracked by Insider Monkey were long this stock, a change of -20% from the previous quarter. By comparison, 8 hedge funds held shares or bullish call options in CWT a year ago. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Is CWT A Good Stock To Buy?

More specifically, Renaissance Technologies was the largest shareholder of California Water Service Group (NYSE:CWT), with a stake worth $8 million reported as of the end of September. Trailing Renaissance Technologies was Winton Capital Management, which amassed a stake valued at $5.5 million. Millennium Management, PDT Partners, and Two Sigma Advisors 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 Arjuna Capital allocated the biggest weight to California Water Service Group (NYSE:CWT), around 0.57% of its 13F portfolio. Winton Capital Management is also relatively very bullish on the stock, dishing out 0.14 percent of its 13F equity portfolio to CWT.

Because California Water Service Group (NYSE:CWT) has faced falling interest from hedge fund managers, it’s easy to see that there lies a certain “tier” of hedge funds that elected to cut their positions entirely last quarter. At the top of the heap, Donald Sussman’s Paloma Partners dropped the largest position of the 750 funds watched by Insider Monkey, totaling about $2.7 million in stock, and Michael Gelband’s ExodusPoint Capital was right behind this move, as the fund dumped about $1.1 million worth. These bearish behaviors are intriguing to say the least, as total hedge fund interest fell by 4 funds last quarter.

Let’s also examine hedge fund activity in other stocks similar to California Water Service Group (NYSE:CWT). We will take a look at Eagle Materials, Inc. (NYSE:EXP), Agios Pharmaceuticals Inc (NASDAQ:AGIO), Euronav NV (NYSE:EURN), and Allogene Therapeutics, Inc. (NASDAQ:ALLO). This group of stocks’ market values are similar to CWT’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
EXP 34 344795 -4
AGIO 23 304362 0
EURN 33 236366 5
ALLO 12 101735 0
Average 25.5 246815 0.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 25.5 hedge funds with bullish positions and the average amount invested in these stocks was $247 million. That figure was $29 million in CWT’s case. Eagle Materials, Inc. (NYSE:EXP) is the most popular stock in this table. On the other hand Allogene Therapeutics, Inc. (NASDAQ:ALLO) is the least popular one with only 12 bullish hedge fund positions. California Water Service Group (NYSE:CWT) is not the least popular stock in this group but hedge fund interest is still below average. 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 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 13.3% in 2020 through June 25th and surpassed the market by 16.8 percentage points. Unfortunately CWT wasn’t nearly as popular as these 10 stocks (hedge fund sentiment was quite bearish); CWT investors were disappointed as the stock returned -9.4% during the second quarter and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.

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