Is Connecticut Water Service, Inc. (CTWS) A Good Stock To Buy?

Hedge Funds and other institutional investors have just completed filing their 13Fs with the Securities and Exchange Commission, revealing their equity portfolios as of the end of September. At Insider Monkey, we follow over 700 of the best-performing investors and by analyzing their 13F filings, we can determine the stocks that they are collectively bullish on. One of their picks is Connecticut Water Service, Inc. (NASDAQ:CTWS), so let’s take a closer look at the sentiment that surrounds it in the current quarter.

Connecticut Water Service, Inc. (NASDAQ:CTWS) was in 6 hedge funds’ portfolios at the end of the third quarter of 2018. CTWS has seen a decrease in activity from the world’s largest hedge funds of late. There were 8 hedge funds in our database with CTWS positions at the end of the previous quarter. Our calculations also showed that CTWS isn’t among the 30 most popular stocks among hedge funds.

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that hedge funds’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the market by 18 percentage points since May 2014 through December 3, 2018 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 24% through December 3, 2018. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Mario Gabelli of GAMCO Investors

Mario Gabelli of GAMCO Investors

We’re going to take a glance at the new hedge fund action encompassing Connecticut Water Service, Inc. (NASDAQ:CTWS).

What have hedge funds been doing with Connecticut Water Service, Inc. (NASDAQ:CTWS)?

Heading into the fourth quarter of 2018, a total of 6 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -25% from the previous quarter. The graph below displays the number of hedge funds with bullish position in CTWS over the last 13 quarters. So, let’s find 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 CTWS Positions

More specifically, Renaissance Technologies was the largest shareholder of Connecticut Water Service, Inc. (NASDAQ:CTWS), with a stake worth $15.3 million reported as of the end of September. Trailing Renaissance Technologies was Millennium Management, which amassed a stake valued at $8.4 million. GAMCO Investors, Stevens Capital Management, and AQR Capital Management were also very fond of the stock, giving the stock large weights in their portfolios.

Judging by the fact that Connecticut Water Service, Inc. (NASDAQ:CTWS) has experienced bearish sentiment from the smart money, it’s easy to see that there exists a select few hedgies that decided to sell off their full holdings by the end of the third quarter. It’s worth mentioning that Howard Guberman’s Gruss Asset Management dropped the largest position of all the hedgies monitored by Insider Monkey, worth an estimated $16.3 million in stock. D. E. Shaw’s fund, D E Shaw, also sold off its stock, about $0.3 million worth. These bearish behaviors are important to note, as aggregate hedge fund interest was cut by 2 funds by the end of the third quarter.

Let’s check out hedge fund activity in other stocks similar to Connecticut Water Service, Inc. (NASDAQ:CTWS). These stocks are CytomX Therapeutics, Inc. (NASDAQ:CTMX), Forrester Research, Inc. (NASDAQ:FORR), Harmony Gold Mining Co. (NYSE:HMY), and SP Plus Corp (NASDAQ:SP). All of these stocks’ market caps are similar to CTWS’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
CTMX 19 144953 0
FORR 9 52008 0
HMY 7 8354 -1
SP 12 112782 1
Average 11.75 79524 0

View table here if you experience formatting issues.

As you can see these stocks had an average of 11.75 hedge funds with bullish positions and the average amount invested in these stocks was $80 million. That figure was $27 million in CTWS’s case. CytomX Therapeutics, Inc. (NASDAQ:CTMX) is the most popular stock in this table. On the other hand Harmony Gold Mining Co. (NYSE:HMY) is the least popular one with only 7 bullish hedge fund positions. Compared to these stocks Connecticut Water Service, Inc. (NASDAQ:CTWS) is even less popular than HMY. Considering that hedge funds aren’t fond of this stock in relation to other companies analyzed in this article, it may be a good idea to analyze it in detail and understand why the smart money isn’t behind this stock. This isn’t necessarily bad news. Although it is possible that hedge funds may think the stock is overpriced and view the stock as a short candidate, they may not be very familiar with the bullish thesis. In either case more research is warranted.

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