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Is Wabtec Corporation (WAB) Going to Burn These Hedge Funds?

The latest 13F reporting period has come and gone, and Insider Monkey have plowed through 823 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds’ and investors’ portfolio positions as of June 30th, when the S&P 500 Index was trading around the 3100 level. Since the end of March, investors decided to bet on the economic recovery and a stock market rebound. S&P 500 Index returned more than 50% since its bottom. In this article you are going to find out whether hedge funds thought Wabtec Corporation (NYSE:WAB) was a good investment heading into the third quarter and how the stock traded in comparison to the top hedge fund picks.

Wabtec Corporation (NYSE:WAB) was in 39 hedge funds’ portfolios at the end of June. The all time high for this statistics is 41. WAB has experienced a decrease in hedge fund interest recently. There were 41 hedge funds in our database with WAB positions at the end of the first quarter. Our calculations also showed that WAB isn’t among the 30 most popular stocks among hedge funds (click for Q2 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.

To most market participants, hedge funds are seen as underperforming, outdated investment tools of years past. While there are more than 8000 funds with their doors open at present, Our researchers hone in on the masters of this group, approximately 850 funds. Most estimates calculate that this group of people command the majority of the hedge fund industry’s total capital, and by following their inimitable stock picks, Insider Monkey has come up with several investment strategies that have historically outperformed Mr. Market. Insider Monkey’s flagship short hedge fund strategy surpassed the S&P 500 short ETFs by around 20 percentage points annually since its inception in March 2017. Our portfolio of short stocks lost 34% since February 2017 (through August 17th) even though the market was up 53% during the same period. We just shared a list of 8 short targets in our latest quarterly update .

Boykin Curry EAGLE CAPITAL MANAGEMENT

Boykin Curry of Eagle Capital

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 precious metals prices. So, we are checking out this junior gold mining stock. Legal marijuana is one of the fastest growing industries right now, so we are checking out stock pitches like “the Starbucks of cannabis” to identify the next tenbagger. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We go through lists like the 10 most profitable companies in the world 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. With all of this in mind we’re going to check out the latest hedge fund action regarding Wabtec Corporation (NYSE:WAB).

How are hedge funds trading Wabtec Corporation (NYSE:WAB)?

At second quarter’s end, a total of 39 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -5% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards WAB over the last 20 quarters. With the smart money’s positions undergoing their usual ebb and flow, there exists a few notable hedge fund managers who were adding to their stakes considerably (or already accumulated large positions).

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Pzena Investment Management, managed by Richard S. Pzena, holds the largest position in Wabtec Corporation (NYSE:WAB). Pzena Investment Management has a $358.8 million position in the stock, comprising 2.3% of its 13F portfolio. On Pzena Investment Management’s heels is Farallon Capital, which holds a $249 million position; 2% of its 13F portfolio is allocated to the stock. Some other members of the smart money that hold long positions encompass Boykin Curry’s Eagle Capital Management, Munir Javeri’s 3G Sahana Capital Management and Robert Rodriguez and Steven Romick’s First Pacific Advisors LLC. In terms of the portfolio weights assigned to each position 3G Sahana Capital Management allocated the biggest weight to Wabtec Corporation (NYSE:WAB), around 23.43% of its 13F portfolio. Park Presidio Capital is also relatively very bullish on the stock, designating 8.54 percent of its 13F equity portfolio to WAB.

Judging by the fact that Wabtec Corporation (NYSE:WAB) has witnessed falling interest from the aggregate hedge fund industry, it’s safe to say that there is a sect of funds that slashed their full holdings heading into Q3. Interestingly, Robert Pohly’s Samlyn Capital said goodbye to the biggest stake of the 750 funds watched by Insider Monkey, worth close to $25.7 million in stock. Vinit Bodas’s fund, Deccan Value Advisors, also dumped its stock, about $18.9 million worth. These moves are intriguing to say the least, as aggregate hedge fund interest fell by 2 funds heading into Q3.

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Wabtec Corporation (NYSE:WAB) but similarly valued. These stocks are Logitech International SA (NASDAQ:LOGI), Nordson Corporation (NASDAQ:NDSN), DraftKings Inc. (NASDAQ:DKNG), PerkinElmer, Inc. (NYSE:PKI), Cloudflare, Inc. (NYSE:NET), Horizon Therapeutics Public Limited Company (NASDAQ:HZNP), and ABIOMED, Inc. (NASDAQ:ABMD). This group of stocks’ market valuations match WAB’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
LOGI 13 277342 -2
NDSN 21 67604 -1
DKNG 53 693614 18
PKI 30 1263237 9
NET 36 456001 12
HZNP 45 2955360 4
ABMD 31 823991 4
Average 32.7 933878 6.3

View table here if you experience formatting issues.

As you can see these stocks had an average of 32.7 hedge funds with bullish positions and the average amount invested in these stocks was $934 million. That figure was $1528 million in WAB’s case. DraftKings Inc. (NASDAQ:DKNG) is the most popular stock in this table. On the other hand Logitech International SA (NASDAQ:LOGI) is the least popular one with only 13 bullish hedge fund positions. Wabtec Corporation (NYSE:WAB) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for WAB is 64. 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 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 33% in 2020 through the end of August and still beat the market by 23.2 percentage points. Hedge funds were also right about betting on WAB, though not to the same extent, as the stock returned 15.8% since the end of June and outperformed the market as well.

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