We are still in an overall bull market and many stocks that smart money investors were piling into surged through the end of November. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained 54% and 51% respectively. Hedge funds’ top 3 stock picks returned 41.7% this year and beat the S&P 500 ETFs by 14 percentage points. Investing in index funds guarantees you average returns, not superior returns. We are looking to generate superior returns for our readers. That’s why we believe it isn’t a waste of time to check out hedge fund sentiment before you invest in a stock like Watts Water Technologies Inc (NYSE:WTS).
Is Watts Water Technologies Inc (NYSE:WTS) a splendid stock to buy now? Money managers are becoming more confident. The number of bullish hedge fund positions advanced by 7 in recent months. Our calculations also showed that WTS isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings). WTS was in 22 hedge funds’ portfolios at the end of the third quarter of 2019. There were 15 hedge funds in our database with WTS positions at the end of the previous quarter.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
In today’s marketplace there are tons of methods market participants put to use to appraise publicly traded companies. A duo of the less utilized methods are hedge fund and insider trading sentiment. Our experts have shown that, historically, those who follow the best picks of the elite money managers can beat their index-focused peers by a significant margin (see the details here).
Israel Englander of Millennium Management
We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world’s largest cannabis market, so we check out this European marijuana stock pitch. One of the most bullish analysts in America just put his money where his mouth is. He says, “I’m investing more today than I did back in early 2009.” So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We also rely on the best performing hedge funds‘ buy/sell signals. We’re going to take a gander at the new hedge fund action encompassing Watts Water Technologies Inc (NYSE:WTS).
How have hedgies been trading Watts Water Technologies Inc (NYSE:WTS)?
At the end of the third quarter, a total of 22 of the hedge funds tracked by Insider Monkey were long this stock, a change of 47% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards WTS over the last 17 quarters. With hedge funds’ capital changing hands, there exists a few notable hedge fund managers who were adding to their holdings meaningfully (or already accumulated large positions).
When looking at the institutional investors followed by Insider Monkey, GAMCO Investors, managed by Mario Gabelli, holds the number one position in Watts Water Technologies Inc (NYSE:WTS). GAMCO Investors has a $95.2 million position in the stock, comprising 0.8% of its 13F portfolio. Sitting at the No. 2 spot is Impax Asset Management, managed by Ian Simm, which holds a $88.4 million position; 1.2% of its 13F portfolio is allocated to the company. Remaining peers with similar optimism encompass Renaissance Technologies, Israel Englander’s Millennium Management and Noam Gottesman’s GLG Partners. In terms of the portfolio weights assigned to each position Impax Asset Management allocated the biggest weight to Watts Water Technologies Inc (NYSE:WTS), around 1.15% of its 13F portfolio. GAMCO Investors is also relatively very bullish on the stock, dishing out 0.79 percent of its 13F equity portfolio to WTS.
As aggregate interest increased, key money managers were breaking ground themselves. Arrowstreet Capital, managed by Peter Rathjens, Bruce Clarke and John Campbell, initiated the most outsized position in Watts Water Technologies Inc (NYSE:WTS). Arrowstreet Capital had $2.8 million invested in the company at the end of the quarter. Paul Marshall and Ian Wace’s Marshall Wace also made a $1.5 million investment in the stock during the quarter. The following funds were also among the new WTS investors: Minhua Zhang’s Weld Capital Management, Donald Sussman’s Paloma Partners, and Dmitry Balyasny’s Balyasny Asset Management.
Let’s check out hedge fund activity in other stocks similar to Watts Water Technologies Inc (NYSE:WTS). These stocks are II-VI, Inc. (NASDAQ:IIVI), Embraer SA (NYSE:ERJ), UMB Financial Corporation (NASDAQ:UMBF), and Sinopec Shanghai Petrochemical Co. (NYSE:SHI). This group of stocks’ market values are similar to WTS’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| IIVI | 31 | 200487 | 10 |
| ERJ | 13 | 76731 | 6 |
| UMBF | 14 | 77629 | -2 |
| SHI | 3 | 13063 | -2 |
| Average | 15.25 | 91978 | 3 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 15.25 hedge funds with bullish positions and the average amount invested in these stocks was $92 million. That figure was $266 million in WTS’s case. II-VI, Inc. (NASDAQ:IIVI) is the most popular stock in this table. On the other hand Sinopec Shanghai Petrochemical Co. (NYSE:SHI) is the least popular one with only 3 bullish hedge fund positions. Watts Water Technologies Inc (NYSE:WTS) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately WTS wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on WTS were disappointed as the stock returned 3.7% during the fourth quarter (through the end of November) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.
Disclosure: None. This article was originally published at Insider Monkey.
