Is Global Water Resources, Inc. (GWRS) Going to Burn These Hedge Funds?

We at Insider Monkey have gone over 821 13F filings that hedge funds and prominent investors are required to file by the SEC The 13F filings show the funds’ and investors’ portfolio positions as of March 31st, near the height of the coronavirus market crash. In this article, we look at what those funds think of Global Water Resources, Inc. (NASDAQ:GWRS) based on that data.

Is Global Water Resources, Inc. (NASDAQ:GWRS) a healthy stock for your portfolio? The smart money is taking a bearish view. The number of bullish hedge fund bets dropped by 1 lately. Our calculations also showed that GWRS 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). GWRS was in 3 hedge funds’ portfolios at the end of March. There were 4 hedge funds in our database with GWRS positions at the end of the previous quarter.

Video: 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 monthly stock picks returned 72% since March 2017 and outperformed the S&P 500 ETFs by more than 44 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

Philip Hempleman Ardsley Partners

Philip Hempleman of Ardsley Partners

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, legendary investor Bill Miller told investors to sell 7 extremely popular recession stocks last month. So, we went through his list and recommended another stock with 100% upside potential instead. We interview hedge fund managers and ask them about their best ideas. You can watch our latest hedge fund manager interview here and find out the name of the large-cap healthcare stock that Sio Capital’s Michael Castor expects to double. 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 S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind we’re going to take a look at the key hedge fund action encompassing Global Water Resources, Inc. (NASDAQ:GWRS).

What does smart money think about Global Water Resources, Inc. (NASDAQ:GWRS)?

Heading into the second quarter of 2020, a total of 3 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -25% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards GWRS over the last 18 quarters. With hedgies’ positions undergoing their usual ebb and flow, there exists an “upper tier” of noteworthy hedge fund managers who were increasing their stakes considerably (or already accumulated large positions).

Is GWRS A Good Stock To Buy?

The largest stake in Global Water Resources, Inc. (NASDAQ:GWRS) was held by Renaissance Technologies, which reported holding $3.1 million worth of stock at the end of September. It was followed by Royce & Associates with a $1.1 million position. The only other hedge fund that is bullish on the company was Trellus Management Company.

Because Global Water Resources, Inc. (NASDAQ:GWRS) has witnessed declining sentiment from the smart money, logic holds that there is a sect of money managers who were dropping their positions entirely in the third quarter. Interestingly, Matt Diserio and Disque Deane Jr.’s Water Asset Management sold off the largest position of the “upper crust” of funds tracked by Insider Monkey, valued at an estimated $4.8 million in stock, and Philip Hempleman’s Ardsley Partners was right behind this move, as the fund sold off about $1.1 million worth. These moves are intriguing to say the least, as aggregate hedge fund interest fell by 1 funds in the third quarter.

Let’s now review hedge fund activity in other stocks similar to Global Water Resources, Inc. (NASDAQ:GWRS). These stocks are MarineMax, Inc. (NYSE:HZO), eGain Communications Corporation (NASDAQ:EGAN), CorePoint Lodging Inc. (NYSE:CPLG), and Xunlei Ltd (NASDAQ:XNET). This group of stocks’ market values resemble GWRS’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
HZO 10 3750 2
EGAN 9 17966 0
CPLG 10 17084 -1
XNET 4 1229 -2
Average 8.25 10007 -0.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 8.25 hedge funds with bullish positions and the average amount invested in these stocks was $10 million. That figure was $4 million in GWRS’s case. MarineMax, Inc. (NYSE:HZO) is the most popular stock in this table. On the other hand Xunlei Ltd (NASDAQ:XNET) is the least popular one with only 4 bullish hedge fund positions. Compared to these stocks Global Water Resources, Inc. (NASDAQ:GWRS) is even less popular than XNET. Hedge funds dodged a bullet by taking a bearish stance towards GWRS. Our calculations showed that the top 10 most popular hedge fund stocks returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 7.9% in 2020 through May 22nd but managed to beat the market by 15.6 percentage points. Unfortunately GWRS wasn’t nearly as popular as these 10 stocks (hedge fund sentiment was very bearish); GWRS investors were disappointed as the stock returned -2.1% during the second quarter (through May 22nd) 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 so far in 2020.

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