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Hedge Funds Cautiously Watching Watford Holdings Ltd. (WTRE)

The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. Insider Monkey finished processing 821 13F filings submitted by hedge funds and prominent investors. These filings show these funds’ portfolio positions as of March 31st, 2020. In this article we are going to take a look at smart money sentiment towards Watford Holdings Ltd. (NASDAQ:WTRE).

Hedge fund interest in Watford Holdings Ltd. (NASDAQ:WTRE) shares was flat at the end of last quarter. This is usually a negative indicator. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as REX American Resources Corp (NYSE:REX), Tenneco Inc (NYSE:TEN), and Tsakos Energy Navigation Ltd. (NYSE:TNP) to gather more data points. Our calculations also showed that WTRE 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.

In the 21st century investor’s toolkit there are several methods stock traders employ to value stocks. Some of the most underrated methods are hedge fund and insider trading indicators. Our researchers have shown that, historically, those who follow the best picks of the top investment managers can beat their index-focused peers by a solid amount (see the details here).

John Overdeck of Two Sigma

John Overdeck of Two Sigma Advisors

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 we’re going to review the new hedge fund action surrounding Watford Holdings Ltd. (NASDAQ:WTRE).

How have hedgies been trading Watford Holdings Ltd. (NASDAQ:WTRE)?

At Q1’s end, a total of 7 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 0% from the previous quarter. By comparison, 0 hedge funds held shares or bullish call options in WTRE a year ago. With the smart money’s sentiment swirling, there exists an “upper tier” of notable hedge fund managers who were increasing their stakes meaningfully (or already accumulated large positions).

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Capital Returns Management, managed by Ron Bobman, holds the biggest position in Watford Holdings Ltd. (NASDAQ:WTRE). Capital Returns Management has a $4.9 million position in the stock, comprising 12.4% of its 13F portfolio. Sitting at the No. 2 spot is Ken Griffin of Citadel Investment Group, with a $1.3 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Some other professional money managers with similar optimism include John Overdeck and David Siegel’s Two Sigma Advisors, Renaissance Technologies and Greg Eisner’s Engineers Gate Manager. In terms of the portfolio weights assigned to each position Capital Returns Management allocated the biggest weight to Watford Holdings Ltd. (NASDAQ:WTRE), around 12.39% of its 13F portfolio. Engineers Gate Manager is also relatively very bullish on the stock, dishing out 0.02 percent of its 13F equity portfolio to WTRE.

Because Watford Holdings Ltd. (NASDAQ:WTRE) has faced bearish sentiment from the entirety of the hedge funds we track, we can see that there exists a select few funds who sold off their entire stakes heading into Q4. It’s worth mentioning that Israel Englander’s Millennium Management cut the largest stake of the “upper crust” of funds watched by Insider Monkey, worth close to $2.2 million in stock. Paul Marshall and Ian Wace’s fund, Marshall Wace LLP, also dumped its stock, about $0.3 million worth. These bearish behaviors are important to note, as total hedge fund interest stayed the same (this is a bearish signal in our experience).

Let’s go over hedge fund activity in other stocks similar to Watford Holdings Ltd. (NASDAQ:WTRE). We will take a look at REX American Resources Corp (NYSE:REX), Tenneco Inc (NYSE:TEN), Tsakos Energy Navigation Ltd. (NYSE:TNP), and Benefitfocus Inc (NASDAQ:BNFT). This group of stocks’ market caps are similar to WTRE’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
REX 7 25263 -1
TEN 17 40519 -4
TNP 13 33143 3
BNFT 13 18792 0
Average 12.5 29429 -0.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 12.5 hedge funds with bullish positions and the average amount invested in these stocks was $29 million. That figure was $8 million in WTRE’s case. Tenneco Inc (NYSE:TEN) is the most popular stock in this table. On the other hand REX American Resources Corp (NYSE:REX) is the least popular one with only 7 bullish hedge fund positions. Compared to these stocks Watford Holdings Ltd. (NASDAQ:WTRE) is even less popular than REX. Hedge funds dodged a bullet by taking a bearish stance towards WTRE. 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 WTRE wasn’t nearly as popular as these 10 stocks (hedge fund sentiment was very bearish); WTRE investors were disappointed as the stock returned 19% 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.