Hedge Funds Are Selling Waters Corporation (WAT)

Insider Monkey has processed numerous 13F filings of hedge funds and successful value investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds’ and successful investors’ positions as of the end of the first quarter. You can find articles about an individual hedge fund’s trades on numerous financial news websites. However, in this article we will take a look at their collective moves over the last 4.5 years and analyze what the smart money thinks of Waters Corporation (NYSE:WAT) based on that data.

Waters Corporation (NYSE:WAT) was in 25 hedge funds’ portfolios at the end of the first quarter of 2020. WAT investors should be aware of a decrease in support from the world’s most elite money managers in recent months. There were 27 hedge funds in our database with WAT positions at the end of the previous quarter. Our calculations also showed that WAT 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).

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

At the moment there are many methods market participants employ to evaluate stocks. A pair of the most underrated methods are hedge fund and insider trading activity. Our experts have shown that, historically, those who follow the best picks of the best money managers can outclass the broader indices by a healthy margin (see the details here).

David Blood

David Blood of Generation Investment Management

We leave no stone unturned when looking for the next great investment idea. For example, we believe electric vehicles and energy storage are set to become giant markets, and we want to take advantage of the declining lithium prices amid the COVID-19 pandemic. So we are checking out investment opportunities like these. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Now let’s take a look at the fresh hedge fund action regarding Waters Corporation (NYSE:WAT).

What have hedge funds been doing with Waters Corporation (NYSE:WAT)?

Heading into the second quarter of 2020, a total of 25 of the hedge funds tracked by Insider Monkey were long this stock, a change of -7% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards WAT over the last 18 quarters. With hedgies’ sentiment swirling, there exists an “upper tier” of key hedge fund managers who were boosting their holdings substantially (or already accumulated large positions).

More specifically, Impax Asset Management was the largest shareholder of Waters Corporation (NYSE:WAT), with a stake worth $79.8 million reported as of the end of September. Trailing Impax Asset Management was Generation Investment Management, which amassed a stake valued at $57.6 million. GLG Partners, Select Equity Group, and D E Shaw 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 Impax Asset Management allocated the biggest weight to Waters Corporation (NYSE:WAT), around 1.06% of its 13F portfolio. PDT Partners is also relatively very bullish on the stock, setting aside 0.62 percent of its 13F equity portfolio to WAT.

Since Waters Corporation (NYSE:WAT) has witnessed falling interest from hedge fund managers, logic holds that there lies a certain “tier” of fund managers that slashed their entire stakes last quarter. Interestingly, Israel Englander’s Millennium Management sold off the largest position of the 750 funds followed by Insider Monkey, comprising about $5.4 million in stock. Donald Sussman’s fund, Paloma Partners, also sold off its stock, about $3.9 million worth. These transactions are intriguing to say the least, as total hedge fund interest was cut by 2 funds last quarter.

Let’s go over hedge fund activity in other stocks similar to Waters Corporation (NYSE:WAT). These stocks are Teladoc Health, Inc (NYSE:TDOC), West Pharmaceutical Services Inc. (NYSE:WST), Yandex NV (NASDAQ:YNDX), and NortonLifeLock Inc. (NASDAQ:NLOK). All of these stocks’ market caps match WAT’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
TDOC 36 532644 13
WST 27 346802 -2
YNDX 35 770433 -3
NLOK 42 1352392 -4
Average 35 750568 1

View table here if you experience formatting issues.

As you can see these stocks had an average of 35 hedge funds with bullish positions and the average amount invested in these stocks was $751 million. That figure was $337 million in WAT’s case. NortonLifeLock Inc. (NASDAQ:NLOK) is the most popular stock in this table. On the other hand West Pharmaceutical Services Inc. (NYSE:WST) is the least popular one with only 27 bullish hedge fund positions. Compared to these stocks Waters Corporation (NYSE:WAT) is even less popular than WST. Hedge funds dodged a bullet by taking a bearish stance towards WAT. Our calculations showed that the top 10 most popular hedge fund stocks returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 13.9% in 2020 through June 10th but managed to beat the market by 14.2 percentage points. Unfortunately WAT wasn’t nearly as popular as these 10 stocks (hedge fund sentiment was very bearish); WAT investors were disappointed as the stock returned 6.9% during the second quarter (through June 10th) 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 so far in 2020.

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