Is It Time To Consider SJW Group (SJW)?

It seems that the masses and most of the financial media hate hedge funds and what they do, but why is this hatred of hedge funds so prominent? At the end of the day, these asset management firms do not gamble the hard-earned money of the people who are on the edge of poverty. Truth be told, most hedge fund managers and other smaller players within this industry are very smart and skilled investors. Of course, they may also make wrong bets in some instances, but no one knows what the future holds and how market participants will react to the bountiful news that floods in each day. The S&P 500 Index gained 7.6% in the 12 month-period that ended November 21, while less than 49% of its stocks beat the benchmark. In contrast, the 30 most popular mid-cap stocks among the top hedge fund investors tracked by the Insider Monkey team returned 18% over the same period, which provides evidence that these money managers do have great stock picking abilities. That’s why we believe it isn’t a waste of time to check out hedge fund sentiment before you invest in a stock like SJW Group (NYSE:SJW).

SJW Group (NYSE:SJW) investors should pay attention to a decrease in hedge fund interest lately. SJW was in 10 hedge funds’ portfolios at the end of the third quarter of 2016. There were 12 hedge funds in our database with SJW holdings at the end of the previous quarter. 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 51job, Inc. (ADR) (NASDAQ:JOBS), Argan, Inc. (NYSEAMEX:AGX), and FelCor Lodging Trust Incorporated (NYSE:FCH) to gather more data points.

At Insider Monkey, we’ve developed an investment strategy that has delivered market-beating returns over the past 12 months. Our strategy identifies the 100 best-performing funds of the previous quarter from among the collection of 700+ successful funds that we track in our database, which we accomplish using our returns methodology. We then study the portfolios of those 100 funds using the latest 13F data to uncover the 30 most popular mid-cap stocks (market caps of between $1 billion and $10 billion) among them to hold until the next filing period. This strategy delivered 18% gains over the past 12 months, more than doubling the 8% returns enjoyed by the S&P 500 ETFs.

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What does the smart money think about SJW Group (NYSE:SJW)?

Heading into the fourth quarter of 2016, a total of 10 of the hedge funds tracked by Insider Monkey were long this stock, a 17% drop from one quarter earlier. The graph below displays the number of hedge funds with bullish position in SJW over the last 5 quarters, which are still up by 67% in 2016. With hedgies’ positions undergoing their usual ebb and flow, there exists an “upper tier” of key hedge fund managers who were boosting their holdings substantially (or already accumulated large positions).


According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Chuck Royce of Royce & Associates holds the largest position in SJW Group (NYSE:SJW). Royce & Associates has a $17.5 million position in the stock. The second most bullish fund manager is Renaissance Technologies, one of the largest hedge funds in the world, which holds an $11.7 million position. Other hedge funds and institutional investors that are bullish include Mario Gabelli’s GAMCO Investors, Cliff Asness’ AQR Capital Management, and Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital. We should note that none of these hedge funds are among our list of the 100 best performing hedge funds which is based on the performance of their 13F long positions in non-microcap stocks.

Seeing as SJW Group (NYSE:SJW) has witnessed a decline in interest from the entirety of the hedge funds we track, logic holds that there lies a certain “tier” of funds that decided to sell off their full holdings by the end of the third quarter. At the top of the heap, Israel Englander’s Millennium Management cashed in the biggest position of the “upper crust” of funds monitored by Insider Monkey, comprising an estimated $1.5 million in stock. David E. Shaw’s fund, D E Shaw, also dropped its stock, about $1.2 million worth.

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as SJW Group (NYSE:SJW) but similarly valued. We will take a look at 51job, Inc. (ADR) (NASDAQ:JOBS), Argan, Inc. (NYSEAMEX:AGX), FelCor Lodging Trust Incorporated (NYSE:FCH), and Cavco Industries, Inc. (NASDAQ:CVCO). This group of stocks’ market values resemble SJW’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
JOBS 6 26642 2
AGX 17 107827 4
FCH 17 122725 -4
CVCO 13 166370 -3

As you can see these stocks had an average of 13 hedge funds with bullish positions and the average amount invested in these stocks was $106 million. That figure was $50 million in SJW’s case. Argan, Inc. (NYSEAMEX:AGX) is the most popular stock in this table. On the other hand 51job, Inc. (ADR) (NASDAQ:JOBS) is the least popular one with only 6 bullish hedge fund positions. SJW Group (NYSE:SJW) 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. In this regard AGX might be a better candidate to consider taking a long position in.

Disclosure: None