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Is Evoqua Water Technologies Corp. (AQUA) Going to Burn These Hedge Funds?

Is Evoqua Water Technologies Corp. (NYSE:AQUA) a good investment right now? We check hedge fund and billionaire investor sentiment before delving into hours of research. Hedge funds spend millions of dollars on Ivy League graduates, expert networks, and get tips from investment bankers and industry insiders. Sure they sometimes fail miserably, but their consensus stock picks historically outperformed the market after adjusting for known risk factors.

Hedge fund interest in Evoqua Water Technologies Corp. (NYSE:AQUA) shares was flat at the end of last quarter. This is usually a negative indicator. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Provident Financial Services, Inc. (NYSE:PFS), U.S. Physical Therapy, Inc. (NYSE:USPH), and Electronics For Imaging, Inc. (NASDAQ:EFII) to gather more data points. Our calculations also showed that AQUA isn’t among the 30 most popular stocks among hedge funds (see the video below).
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s flagship best performing hedge funds strategy returned 25.8% year to date (through May 30th) and outperformed the market even though it draws its stock picks among small-cap stocks. This strategy also outperformed the market by 40 percentage points since its inception (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

AQUA_oct2019

Unlike former hedge manager, Dr. Steve Sjuggerud, who is convinced Dow will soar past 40000, our long-short investment strategy doesn’t rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. Let’s take a gander at the new hedge fund action regarding Evoqua Water Technologies Corp. (NYSE:AQUA).

What have hedge funds been doing with Evoqua Water Technologies Corp. (NYSE:AQUA)?

At the end of the second quarter, a total of 13 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 0% from the first quarter of 2019. By comparison, 12 hedge funds held shares or bullish call options in AQUA a year ago. With the smart money’s sentiment swirling, there exists an “upper tier” of key hedge fund managers who were increasing their holdings meaningfully (or already accumulated large positions).

Philip Hempleman Ardsley Partners

According to Insider Monkey’s hedge fund database, P2 Capital Partners, managed by Claus Moller, holds the most valuable position in Evoqua Water Technologies Corp. (NYSE:AQUA). P2 Capital Partners has a $76.5 million position in the stock, comprising 5.8% of its 13F portfolio. The second most bullish fund manager is Renaissance Technologies, holding a $8.7 million position; less than 0.1%% of its 13F portfolio is allocated to the company. Remaining professional money managers that are bullish encompass Steve Cohen’s Point72 Asset Management, Philip Hempleman’s Ardsley Partners and Paul Tudor Jones’s Tudor Investment Corp.

Due to the fact that Evoqua Water Technologies Corp. (NYSE:AQUA) has witnessed a decline in interest from hedge fund managers, we can see that there exists a select few hedge funds that decided to sell off their positions entirely in the second quarter. It’s worth mentioning that Doug Gordon, Jon Hilsabeck and Don Jabro’s Shellback Capital sold off the biggest position of all the hedgies watched by Insider Monkey, worth an estimated $0.9 million in call options, and Ken Griffin’s Citadel Investment Group was right behind this move, as the fund sold off about $0.2 million worth. These moves are important to note, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).

Let’s now take a look at hedge fund activity in other stocks similar to Evoqua Water Technologies Corp. (NYSE:AQUA). We will take a look at Provident Financial Services, Inc. (NYSE:PFS), U.S. Physical Therapy, Inc. (NYSE:USPH), Electronics For Imaging, Inc. (NASDAQ:EFII), and Coherus Biosciences Inc (NASDAQ:CHRS). This group of stocks’ market valuations are closest to AQUA’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
PFS 11 56686 5
USPH 11 68548 -2
EFII 15 152934 0
CHRS 27 263266 0
Average 16 135359 0.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 16 hedge funds with bullish positions and the average amount invested in these stocks was $135 million. That figure was $117 million in AQUA’s case. Coherus Biosciences Inc (NASDAQ:CHRS) is the most popular stock in this table. On the other hand Provident Financial Services, Inc. (NYSE:PFS) is the least popular one with only 11 bullish hedge fund positions. Evoqua Water Technologies Corp. (NYSE:AQUA) is not the least popular stock in this group but hedge fund interest is still below average. Our calculations showed that top 20 most popular stocks among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. A small number of hedge funds were also right about betting on AQUA as the stock returned 19.5% during the same time frame and outperformed the market by an even larger margin.

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

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