Hedge Funds Have Never Been This Bullish On California Water Service Group (CWT)

How do we determine whether California Water Service Group (NYSE:CWT) makes for a good investment at the moment? We analyze the sentiment of a select group of the very best investors in the world, who spend immense amounts of time and resources studying companies. They may not always be right (no one is), but data shows that their consensus long positions have historically outperformed the market when we adjust for known risk factors.

California Water Service Group (NYSE:CWT) has seen an increase in support from the world’s most elite money managers in recent months. CWT was in 12 hedge funds’ portfolios at the end of June. There were 8 hedge funds in our database with CWT holdings at the end of the previous quarter. Our calculations also showed that CWT isn’t among the 30 most popular stocks among hedge funds (view the video below).
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s flagship best performing hedge funds strategy returned 25.8% year to date (through May 30th) and outperformed the market even though it draws its stock picks among small-cap stocks. This strategy also outperformed the market by 40 percentage points since its inception (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

David Harding

Unlike former hedge manager, Dr. Steve Sjuggerud, who is convinced Dow will soar past 40000, our long-short investment strategy doesn’t rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. Let’s take a glance at the new hedge fund action regarding California Water Service Group (NYSE:CWT).

How have hedgies been trading California Water Service Group (NYSE:CWT)?

At Q2’s end, a total of 12 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 50% from one quarter earlier. By comparison, 6 hedge funds held shares or bullish call options in CWT a year ago. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

No of Hedge Funds with CWT Positions

According to Insider Monkey’s hedge fund database, David Harding’s Winton Capital Management has the number one position in California Water Service Group (NYSE:CWT), worth close to $16.9 million, corresponding to 0.3% of its total 13F portfolio. Sitting at the No. 2 spot is Millennium Management, managed by Israel Englander, which holds a $4.3 million position; less than 0.1%% of its 13F portfolio is allocated to the company. Some other peers that are bullish include Renaissance Technologies, John Overdeck and David Siegel’s Two Sigma Advisors and Cliff Asness’s AQR Capital Management.

Consequently, key money managers have jumped into California Water Service Group (NYSE:CWT) headfirst. Millennium Management, managed by Israel Englander, created the largest position in California Water Service Group (NYSE:CWT). Millennium Management had $4.3 million invested in the company at the end of the quarter. Peter Muller’s PDT Partners also made a $1.3 million investment in the stock during the quarter. The other funds with new positions in the stock are Ken Griffin’s Citadel Investment Group, Michael Gelband’s ExodusPoint Capital, and Gavin Saitowitz and Cisco J. del Valle’s Springbok Capital.

Let’s now review hedge fund activity in other stocks similar to California Water Service Group (NYSE:CWT). These stocks are Colony Capital Inc (NYSE:CLNY), International Bancshares Corporation (NASDAQ:IBOC), Itron, Inc. (NASDAQ:ITRI), and Yamana Gold Inc. (NYSE:AUY). This group of stocks’ market valuations are closest to CWT’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
CLNY 16 345983 -7
IBOC 18 147617 4
ITRI 22 483411 7
AUY 18 120611 0
Average 18.5 274406 1

View table here if you experience formatting issues.

As you can see these stocks had an average of 18.5 hedge funds with bullish positions and the average amount invested in these stocks was $274 million. That figure was $32 million in CWT’s case. Itron, Inc. (NASDAQ:ITRI) is the most popular stock in this table. On the other hand Colony Capital Inc (NYSE:CLNY) is the least popular one with only 16 bullish hedge fund positions. Compared to these stocks California Water Service Group (NYSE:CWT) is even less popular than CLNY. Our calculations showed that top 20 most popular stocks among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. A small number of hedge funds were also right about betting on CWT, though not to the same extent, as the stock returned 4.9% during the third quarter and outperformed the market as well.

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