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Is Essential Utilities Inc (WTRG) Going to Burn These Hedge Funds?

Insider Monkey has processed numerous 13F filings of hedge funds and successful value investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds’ and successful investors’ positions as of the end of the first quarter. You can find articles about an individual hedge fund’s trades on numerous financial news websites. However, in this article we will take a look at their collective moves over the last 4.5 years and analyze what the smart money thinks of Essential Utilities Inc (NYSE:WTRG) based on that data.

Is Essential Utilities Inc (NYSE:WTRG) the right pick for your portfolio? Hedge funds are becoming hopeful. The number of bullish hedge fund bets improved by 2 lately. Our calculations also showed that WTRG 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). WTRG was in 23 hedge funds’ portfolios at the end of March. There were 21 hedge funds in our database with WTRG positions at the end of the previous quarter.

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

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 58 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’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 36% through May 18th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Bernard Lambilliotte - Ecofin

Bernard Lambilliotte of Ecofin Ltd

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 one. We 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. Keeping this in mind let’s take a peek at the new hedge fund action regarding Essential Utilities Inc (NYSE:WTRG).

What have hedge funds been doing with Essential Utilities Inc (NYSE:WTRG)?

Heading into the second quarter of 2020, a total of 23 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 10% from the previous quarter. By comparison, 15 hedge funds held shares or bullish call options in WTRG a year ago. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Among these funds, Zimmer Partners held the most valuable stake in Essential Utilities Inc (NYSE:WTRG), which was worth $348.6 million at the end of the third quarter. On the second spot was Impax Asset Management which amassed $100 million worth of shares. Carlson Capital, Royce & Associates, and AQR Capital Management 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 Zimmer Partners allocated the biggest weight to Essential Utilities Inc (NYSE:WTRG), around 7.72% of its 13F portfolio. Blackstart Capital is also relatively very bullish on the stock, designating 5.24 percent of its 13F equity portfolio to WTRG.

With a general bullishness amongst the heavyweights, specific money managers have been driving this bullishness. Ecofin Ltd, managed by Bernard Lambilliotte, established the most outsized position in Essential Utilities Inc (NYSE:WTRG). Ecofin Ltd had $5.1 million invested in the company at the end of the quarter. Dmitry Balyasny’s Balyasny Asset Management also made a $3.4 million investment in the stock during the quarter. The other funds with brand new WTRG positions are Ryan Tolkin (CIO)’s Schonfeld Strategic Advisors, Israel Englander’s Millennium Management, and Peter Muller’s PDT Partners.

Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Essential Utilities Inc (NYSE:WTRG) but similarly valued. We will take a look at Zebra Technologies Corporation (NASDAQ:ZBRA), FactSet Research Systems Inc. (NYSE:FDS), Synchrony Financial (NYSE:SYF), and Moderna, Inc. (NASDAQ:MRNA). This group of stocks’ market valuations are similar to WTRG’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
ZBRA 28 576010 -6
FDS 21 210129 -3
SYF 37 1011642 -7
MRNA 25 424500 13
Average 27.75 555570 -0.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 27.75 hedge funds with bullish positions and the average amount invested in these stocks was $556 million. That figure was $519 million in WTRG’s case. Synchrony Financial (NYSE:SYF) is the most popular stock in this table. On the other hand FactSet Research Systems Inc. (NYSE:FDS) is the least popular one with only 21 bullish hedge fund positions. Essential Utilities Inc (NYSE:WTRG) 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 13.9% in 2020 through June 10th and surpassed the market by 14.2 percentage points. Unfortunately WTRG wasn’t nearly as popular as these 10 stocks (hedge fund sentiment was quite bearish); WTRG investors were disappointed as the stock returned 13% 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.