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Is Westinghouse Air Brake Technologies Corp (WAB) Going to Burn These Hedge Funds?

The elite funds run by legendary investors such as Dan Loeb and David Tepper make hundreds of millions of dollars for themselves and their investors by spending enormous resources doing research on small cap stocks that big investment banks don’t follow. Because of their pay structures, they have strong incentive to do the research necessary to beat the market. That’s why we pay close attention to what they think in small cap stocks. In this article, we take a closer look at Westinghouse Air Brake Technologies Corp (NYSE:WAB) from the perspective of those elite funds.

Westinghouse Air Brake Technologies Corp (NYSE:WAB) investors should be aware of a decrease in enthusiasm from smart money in recent months. Westinghouse Air Brake Technologies Corp (NYSE:WAB) was in 27 hedge funds’ portfolios at the end of the third quarter of 2015. There were 33 hedge funds in our database with Westinghouse Air Brake Technologies Corp (NYSE:WAB) positions at the end of the previous quarter. At the end of this article, we will also compare Westinghouse Air Brake Technologies Corp (NYSE:WAB) to other stocks, including Huntington Bancshares Incorporated (NASDAQ:HBAN), Newmont Mining Corp (NYSE:NEM), and Vantiv Inc (NYSE:VNTV) to get a better sense of its popularity.

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If you’d ask most shareholders, hedge funds are assumed to be slow, outdated investment vehicles of yesteryear. While there are over an 8000 funds trading at present, We choose to focus on the masters of this club, around 700 funds. Most estimates calculate that this group of people commands the lion’s share of the hedge fund industry’s total asset base, and by watching their first-class stock picks, Insider Monkey has discovered a number of investment strategies that have historically beaten the broader indices. Insider Monkey’s small-cap hedge fund strategy outpaced the S&P 500 index by 12 percentage points per annum for a decade in their back tests.

With all of this in mind, we’re going to go over the recent action encompassing Westinghouse Air Brake Technologies Corp (NYSE:WAB).

What have hedge funds been doing with Westinghouse Air Brake Technologies Corp (NYSE:WAB)?

At the end of the third quarter, a total of 27 of the hedge funds tracked by Insider Monkey were long this stock, a decrease of 18% from the previous quarter. With hedge funds’ sentiment swirling, there exists a few notable hedge fund managers who were increasing their holdings meaningfully (or already accumulated large positions).

When looking at the institutional investors followed by Insider Monkey, Select Equity Group, managed by Robert Joseph Caruso, holds the biggest position in Westinghouse Air Brake Technologies Corp (NYSE:WAB). Select Equity Group has a $159 million position in the stock, comprising 1.5% of its 13F portfolio. The second most bullish fund manager is Chuck Royce of Royce & Associates, with a $37.4 million position; the fund has 0.2% of its 13F portfolio invested in the stock. Other professional money managers with similar optimism consist of Ferdinand Groos’ Cryder Capital, Tim Curro’s Value Holdings LP and Dmitry Balyasny’s Balyasny Asset Management.

Since Westinghouse Air Brake Technologies Corp (NYSE:WAB) has experienced a bearish sentiment from the aggregate hedge fund industry, logic holds that there were a few funds who sold off their full holdings by the end of the third quarter. It’s worth mentioning that Alexander Mitchell’s Scopus Asset Management dumped the largest stake of the 700 funds monitored by Insider Monkey, totaling close to $25.5 million in CALL options. Benjamin A. Smith’s fund, Laurion Capital Management, also dropped its CALL options., about $5.7 million worth of stock. These transactions are important to note, as total hedge fund interest dropped by 6 funds by the end of the third quarter.

Let’s now take a look at hedge fund activity in other stocks similar to Westinghouse Air Brake Technologies Corp (NYSE:WAB). These stocks are Huntington Bancshares Incorporated (NASDAQ:HBAN), Newmont Mining Corp (NYSE:NEM), Vantiv Inc (NYSE:VNTV), and Computer Sciences Corporation (NYSE:CSC). This group of stocks’ market valuations is similar to Westinghouse Air Brake Technologies Corp (NYSE:WAB)’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
HBAN 20 112883 -4
NEM 37 536115 -1
VNTV 27 474222 -4
CSC 34 1234724 6

As you can see, these stocks had an average of 30 hedge funds with bullish positions and the average amount invested in these stocks was $589 million. That figure was $298 million in Westinghouse Air Brake Technologies Corp (NYSE:WAB)’s case. Newmont Mining Corp (NYSE:NEM) is the most popular stock in this table. On the other hand, Huntington Bancshares Incorporated (NASDAQ:HBAN) is the least popular one with only 20 bullish hedge fund positions. Westinghouse Air Brake Technologies Corp (NYSE:WAB) 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 Newmont Mining Corp (NYSE:NEM) might be a better candidate to consider a long position.

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