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Is American Water Works Company, Inc. (AWK) Going to Burn These Hedge Funds?

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. What do these smart investors think about American Water Works Company, Inc. (NYSE:AWK)?

Is American Water Works Company, Inc. (NYSE:AWK) a bargain? Hedge funds are in an optimistic mood. The number of long hedge fund bets moved up by 1 in recent months. Our calculations also showed that AWK 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). AWK was in 30 hedge funds’ portfolios at the end of the first quarter of 2020. There were 29 hedge funds in our database with AWK holdings at the end of the previous quarter.

Video: Watch our video about the top 5 most popular hedge fund stocks.

In the 21st century investor’s toolkit there are a large number of formulas shareholders put to use to value stocks. A pair of the most useful formulas are hedge fund and insider trading signals. We have shown that, historically, those who follow the best picks of the elite money managers can outpace their index-focused peers by a superb 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 trades like this oneWe 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. With all of this in mind we’re going to review the fresh hedge fund action regarding American Water Works Company, Inc. (NYSE:AWK).

What does smart money think about American Water Works Company, Inc. (NYSE:AWK)?

At Q1’s end, a total of 30 of the hedge funds tracked by Insider Monkey were long this stock, a change of 3% from the fourth quarter of 2019. Below, you can check out the change in hedge fund sentiment towards AWK over the last 18 quarters. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Is AWK A Good Stock To Buy?

The largest stake in American Water Works Company, Inc. (NYSE:AWK) was held by Impax Asset Management, which reported holding $288.3 million worth of stock at the end of September. It was followed by AQR Capital Management with a $92 million position. Other investors bullish on the company included Renaissance Technologies, Two Sigma Advisors, and D E Shaw. In terms of the portfolio weights assigned to each position Trellus Management Company allocated the biggest weight to American Water Works Company, Inc. (NYSE:AWK), around 11.07% of its 13F portfolio. Impax Asset Management is also relatively very bullish on the stock, earmarking 3.84 percent of its 13F equity portfolio to AWK.

With a general bullishness amongst the heavyweights, key money managers have been driving this bullishness. Locust Wood Capital Advisers, managed by Stephen J. Errico, initiated the largest position in American Water Works Company, Inc. (NYSE:AWK). Locust Wood Capital Advisers had $13.2 million invested in the company at the end of the quarter. Adam Usdan’s Trellus Management Company also initiated a $6.2 million position during the quarter. The following funds were also among the new AWK investors: Ken Griffin’s Citadel Investment Group, Sara Nainzadeh’s Centenus Global Management, and Ryan Tolkin (CIO)’s Schonfeld Strategic Advisors.

Let’s check out hedge fund activity in other stocks similar to American Water Works Company, Inc. (NYSE:AWK). We will take a look at CoStar Group Inc (NASDAQ:CSGP), V.F. Corporation (NYSE:VFC), ResMed Inc. (NYSE:RMD), and PACCAR Inc (NASDAQ:PCAR). All of these stocks’ market caps match AWK’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
CSGP 40 1689677 -4
VFC 19 171262 -10
RMD 33 167543 12
PCAR 38 486230 2
Average 32.5 628678 0

View table here if you experience formatting issues.

As you can see these stocks had an average of 32.5 hedge funds with bullish positions and the average amount invested in these stocks was $629 million. That figure was $633 million in AWK’s case. CoStar Group Inc (NASDAQ:CSGP) is the most popular stock in this table. On the other hand V.F. Corporation (NYSE:VFC) is the least popular one with only 19 bullish hedge fund positions. American Water Works Company, Inc. (NYSE:AWK) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 8.3% in 2020 through the end of May and surpassed the market by 13.2 percentage points. Unfortunately AWK wasn’t nearly as popular as these 10 stocks (hedge fund sentiment was quite bearish); AWK investors were disappointed as the stock returned 6.7% during the second quarter 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 in 2020.

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