At the end of February we announced the arrival of the first US recession since 2009 and we predicted that the market will decline by at least 20% in (Recession is Imminent: We Need A Travel Ban NOW). In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. In this article, we will take a closer look at hedge fund sentiment towards Middlesex Water Company (NASDAQ:MSEX).
Is Middlesex Water Company (NASDAQ:MSEX) a buy right now? The best stock pickers are turning less bullish. The number of bullish hedge fund positions fell by 2 lately. Our calculations also showed that MSEX 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.
Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 58 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 36% through May 18th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, 2020’s unprecedented market conditions provide us with the highest number of trading opportunities in a decade. So we are checking out stocks recommended/scorned by legendary Bill Miller. 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 key hedge fund action surrounding Middlesex Water Company (NASDAQ:MSEX).
What does smart money think about Middlesex Water Company (NASDAQ:MSEX)?
At Q1’s end, a total of 7 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -22% from the previous quarter. The graph below displays the number of hedge funds with bullish position in MSEX over the last 18 quarters. With hedgies’ positions undergoing their usual ebb and flow, there exists a select group of notable hedge fund managers who were boosting their holdings meaningfully (or already accumulated large positions).
More specifically, Renaissance Technologies was the largest shareholder of Middlesex Water Company (NASDAQ:MSEX), with a stake worth $31.8 million reported as of the end of September. Trailing Renaissance Technologies was Impax Asset Management, which amassed a stake valued at $7.9 million. GAMCO Investors, Citadel Investment Group, and Millennium Management 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 Middlesex Water Company (NASDAQ:MSEX), around 0.11% of its 13F portfolio. Ellington is also relatively very bullish on the stock, designating 0.05 percent of its 13F equity portfolio to MSEX.
Since Middlesex Water Company (NASDAQ:MSEX) has experienced a decline in interest from the entirety of the hedge funds we track, it’s easy to see that there was a specific group of fund managers who sold off their full holdings heading into Q4. At the top of the heap, Stuart J. Zimmer’s Zimmer Partners dropped the largest stake of the 750 funds followed by Insider Monkey, valued at about $1.1 million in stock. Andrew Weiss’s fund, Weiss Asset Management, also dumped its stock, about $0.3 million worth. These bearish behaviors are interesting, as total hedge fund interest dropped by 2 funds heading into Q4.
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Middlesex Water Company (NASDAQ:MSEX) but similarly valued. We will take a look at Avis Budget Group Inc. (NASDAQ:CAR), Gentherm Inc (NASDAQ:THRM), Southside Bancshares, Inc. (NASDAQ:SBSI), and Antero Midstream Corp (NYSE:AM). This group of stocks’ market values resemble MSEX’s market value.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
View table here if you experience formatting issues.
As you can see these stocks had an average of 14 hedge funds with bullish positions and the average amount invested in these stocks was $155 million. That figure was $50 million in MSEX’s case. Avis Budget Group Inc. (NASDAQ:CAR) is the most popular stock in this table. On the other hand Southside Bancshares, Inc. (NASDAQ:SBSI) is the least popular one with only 8 bullish hedge fund positions. Compared to these stocks Middlesex Water Company (NASDAQ:MSEX) is even less popular than SBSI. Hedge funds dodged a bullet by taking a bearish stance towards MSEX. 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 MSEX wasn’t nearly as popular as these 10 stocks (hedge fund sentiment was very bearish); MSEX investors were disappointed as the stock returned 15% 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.
Disclosure: None. This article was originally published at Insider Monkey.