In this article you are going to find out whether hedge funds think SJW Corp. (NYSE:SJW) is a good investment right now. We like to check what the smart money thinks first before doing extensive research on a given stock. Although there have been several high profile failed hedge fund picks, the consensus picks among hedge fund investors have historically outperformed the market after adjusting for known risk attributes. It’s not surprising given that hedge funds have access to better information and more resources to predict the winners in the stock market.
Is SJW a good stock to buy now? SJW Corp. (NYSE:SJW) was in 9 hedge funds’ portfolios at the end of September. The all time high for this statistics is 22. SJW has seen a decrease in hedge fund sentiment recently. There were 11 hedge funds in our database with SJW holdings at the end of June. Our calculations also showed that SJW isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video for a quick look at the top 5 stocks).
Video: Watch our video about the top 5 most popular hedge fund stocks.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 66 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 underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 15 best blue chip stocks to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our website. Keeping this in mind we’re going to analyze the latest hedge fund action surrounding SJW Corp. (NYSE:SJW).
Do Hedge Funds Think SJW Is A Good Stock To Buy Now?
Heading into the fourth quarter of 2020, a total of 9 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -18% from the second quarter of 2020. Below, you can check out the change in hedge fund sentiment towards SJW over the last 21 quarters. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
According to Insider Monkey’s hedge fund database, Renaissance Technologies, founded by Jim Simons, holds the number one position in SJW Corp. (NYSE:SJW). Renaissance Technologies has a $45.1 million position in the stock, comprising less than 0.1%% of its 13F portfolio. Sitting at the No. 2 spot is GAMCO Investors, led by Mario Gabelli, holding a $7.9 million position; the fund has 0.1% of its 13F portfolio invested in the stock. Some other peers that hold long positions consist of Chuck Royce’s Royce & Associates, Israel Englander’s Millennium Management and Michael Gelband’s ExodusPoint Capital. In terms of the portfolio weights assigned to each position GAMCO Investors allocated the biggest weight to SJW Corp. (NYSE:SJW), around 0.09% of its 13F portfolio. Renaissance Technologies is also relatively very bullish on the stock, earmarking 0.04 percent of its 13F equity portfolio to SJW.
Seeing as SJW Corp. (NYSE:SJW) has experienced falling interest from hedge fund managers, it’s easy to see that there were a few hedge funds that elected to cut their entire stakes heading into Q4. It’s worth mentioning that Noam Gottesman’s GLG Partners dumped the largest investment of all the hedgies watched by Insider Monkey, valued at close to $0.6 million in stock, and Matthew Hulsizer’s PEAK6 Capital Management was right behind this move, as the fund dumped about $0.5 million worth. These bearish behaviors are important to note, as total hedge fund interest was cut by 2 funds heading into Q4.
Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as SJW Corp. (NYSE:SJW) but similarly valued. We will take a look at Simmons First National Corporation (NASDAQ:SFNC), Matson Inc. (NYSE:MATX), Cathay General Bancorp (NASDAQ:CATY), Independent Bank Corp (NASDAQ:INDB), Kura Oncology, Inc. (NASDAQ:KURA), AlloVir, Inc. (NASDAQ:ALVR), and Six Flags Entertainment Corp (NYSE:SIX). This group of stocks’ market values match SJW’s market value.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
View table here if you experience formatting issues.
As you can see these stocks had an average of 19 hedge funds with bullish positions and the average amount invested in these stocks was $192 million. That figure was $64 million in SJW’s case. Six Flags Entertainment Corp (NYSE:SIX) is the most popular stock in this table. On the other hand Matson Inc. (NYSE:MATX) is the least popular one with only 9 bullish hedge fund positions. Compared to these stocks SJW Corp. (NYSE:SJW) is even less popular than MATX. Our overall hedge fund sentiment score for SJW is 15.3. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 32.9% in 2020 through December 8th but managed to beat the market by 16.2 percentage points. A small number of hedge funds were also right about betting on SJW, though not to the same extent, as the stock returned 10.8% since the end of September (through December 8th) and outperformed the market as well.
Disclosure: None. This article was originally published at Insider Monkey.