Hedge Funds Have Never Been This Bullish On Westinghouse Air Brake Technologies Corporation (WAB)

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. We have processed the filings of the more than 873 world-class investment firms that we track and now have access to the collective wisdom contained in these filings, which are based on their June 30th holdings, data that is available nowhere else. Should you consider Westinghouse Air Brake Technologies Corporation (NYSE:WAB) for your portfolio? We’ll look to this invaluable collective wisdom for the answer.

Westinghouse Air Brake Technologies Corporation (NYSE:WAB) has seen an increase in hedge fund sentiment of late. Westinghouse Air Brake Technologies Corporation (NYSE:WAB) was in 46 hedge funds’ portfolios at the end of June. The all time high for this statistic was previously 45. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that WAB isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings).

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 has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by 79 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 underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.

Richard Pzena - Pzena Investment Management

Richard S. Pzena of Pzena Investment Management

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. We go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our homepage. With all of this in mind we’re going to view the fresh hedge fund action regarding Westinghouse Air Brake Technologies Corporation (NYSE:WAB).

Do Hedge Funds Think WAB Is A Good Stock To Buy Now?

Heading into the third quarter of 2021, a total of 46 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 15% from the first quarter of 2020. Below, you can check out the change in hedge fund sentiment towards WAB over the last 24 quarters. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Is WAB A Good Stock To Buy?

Among these funds, Pzena Investment Management held the most valuable stake in Westinghouse Air Brake Technologies Corporation (NYSE:WAB), which was worth $854.4 million at the end of the second quarter. On the second spot was Farallon Capital which amassed $434.1 million worth of shares. 3G Sahana Capital Management, XN Exponent Advisors, and First Pacific Advisors LLC 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 3G Sahana Capital Management allocated the biggest weight to Westinghouse Air Brake Technologies Corporation (NYSE:WAB), around 30.76% of its 13F portfolio. XN Exponent Advisors is also relatively very bullish on the stock, setting aside 11.77 percent of its 13F equity portfolio to WAB.

With a general bullishness amongst the heavyweights, specific money managers have jumped into Westinghouse Air Brake Technologies Corporation (NYSE:WAB) headfirst. Senator Investment Group, managed by Doug Silverman and Alexander Klabin, assembled the most outsized position in Westinghouse Air Brake Technologies Corporation (NYSE:WAB). Senator Investment Group had $82.3 million invested in the company at the end of the quarter. Robert Joseph Caruso’s Select Equity Group also made a $55.9 million investment in the stock during the quarter. The following funds were also among the new WAB investors: Eric W. Mandelblatt and Gaurav Kapadia’s Soroban Capital Partners, D. E. Shaw’s D E Shaw, and Ray Dalio’s Bridgewater Associates.

Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Westinghouse Air Brake Technologies Corporation (NYSE:WAB) but similarly valued. We will take a look at Textron Inc. (NYSE:TXT), Discovery Inc. (NASDAQ:DISCA), Enel Americas S.A. (NYSE:ENIA), argenx SE (NASDAQ:ARGX), BioMarin Pharmaceutical Inc. (NASDAQ:BMRN), Liberty Global plc (NASDAQ:LBTYA), and News Corp (NASDAQ:NWSA). All of these stocks’ market caps resemble WAB’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
TXT 22 962305 1
DISCA 44 587867 -4
ENIA 7 47642 -4
ARGX 27 1454196 0
BMRN 44 1324516 1
LBTYA 30 806409 -5
NWSA 37 1087728 2
Average 30.1 895809 -1.3

View table here if you experience formatting issues.

As you can see these stocks had an average of 30.1 hedge funds with bullish positions and the average amount invested in these stocks was $896 million. That figure was $2824 million in WAB’s case. Discovery Inc. (NASDAQ:DISCA) is the most popular stock in this table. On the other hand Enel Americas S.A. (NYSE:ENIA) is the least popular one with only 7 bullish hedge fund positions. Compared to these stocks Westinghouse Air Brake Technologies Corporation (NYSE:WAB) is more popular among hedge funds. Our overall hedge fund sentiment score for WAB is 90. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks returned 22.9% in 2021 through October 1st but still managed to beat the market by 5.6 percentage points. Hedge funds were also right about betting on WAB as the stock returned 7.8% since the end of June (through 10/1) and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.

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