While the market driven by short-term sentiment influenced by the accomodative interest rate environment in the US, virus news and stimulus talks, many smart money investors are starting to get cautious towards the current bull run since March and hedging or reducing many of their long positions. Some fund managers are betting on Dow hitting 30,000 to generate strong returns. However, as we know, big investors usually buy stocks with strong fundamentals that can deliver gains both in bull and bear markets, which is why we believe we can profit from imitating them. In this article, we are going to take a look at the smart money sentiment surrounding The York Water Company (NASDAQ:YORW).
Is YORW a good stock to buy now? Prominent investors were in a bullish mood. The number of long hedge fund bets increased by 1 lately. The York Water Company (NASDAQ:YORW) was in 9 hedge funds’ portfolios at the end of the third quarter of 2020. The all time high for this statistics is 11. Our calculations also showed that YORW 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.
Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research was 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’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 13% through November 17th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
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. With all of this in mind let’s analyze the new hedge fund action encompassing The York Water Company (NASDAQ:YORW).
Do Hedge Funds Think YORW Is A Good Stock To Buy Now?
At the end of September, a total of 9 of the hedge funds tracked by Insider Monkey were long this stock, a change of 13% from the second quarter of 2020. By comparison, 8 hedge funds held shares or bullish call options in YORW a year ago. With hedge funds’ capital changing hands, there exists an “upper tier” of key hedge fund managers who were boosting their stakes meaningfully (or already accumulated large positions).
Of the funds tracked by Insider Monkey, Renaissance Technologies has the number one position in The York Water Company (NASDAQ:YORW), worth close to $10.5 million, amounting to less than 0.1%% of its total 13F portfolio. Sitting at the No. 2 spot is GAMCO Investors, managed by Mario Gabelli, which holds a $1.8 million position; less than 0.1%% of its 13F portfolio is allocated to the company. Some other hedge funds and institutional investors that hold long positions include Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital, Israel Englander’s Millennium Management and John Overdeck and David Siegel’s Two Sigma Advisors. In terms of the portfolio weights assigned to each position GAMCO Investors allocated the biggest weight to The York Water Company (NASDAQ:YORW), around 0.02% of its 13F portfolio. Winton Capital Management is also relatively very bullish on the stock, earmarking 0.02 percent of its 13F equity portfolio to YORW.
As one would reasonably expect, some big names were leading the bulls’ herd. Arrowstreet Capital, managed by Peter Rathjens, Bruce Clarke and John Campbell, established the largest position in The York Water Company (NASDAQ:YORW). Arrowstreet Capital had $0.8 million invested in the company at the end of the quarter. Israel Englander’s Millennium Management also made a $0.7 million investment in the stock during the quarter. The only other fund with a new position in the stock is Alec Litowitz and Ross Laser’s Magnetar Capital.
Let’s also examine hedge fund activity in other stocks similar to The York Water Company (NASDAQ:YORW). We will take a look at Adecoagro SA (NYSE:AGRO), The Chefs Warehouse, Inc (NASDAQ:CHEF), Fluidigm Corporation (NASDAQ:FLDM), Poseida Therapeutics, Inc. (NASDAQ:PSTX), trivago N.V. (NASDAQ:TRVG), ACCO Brands Corporation (NYSE:ACCO), and Summit Hotel Properties Inc (NYSE:INN). All of these stocks’ market caps match YORW’s market cap.
|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 14.1 hedge funds with bullish positions and the average amount invested in these stocks was $76 million. That figure was $16 million in YORW’s case. Fluidigm Corporation (NASDAQ:FLDM) is the most popular stock in this table. On the other hand trivago N.V. (NASDAQ:TRVG) is the least popular one with only 8 bullish hedge fund positions. The York Water Company (NASDAQ:YORW) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for YORW is 33.2. 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 and still beat the market by 16.2 percentage points. A small number of hedge funds were also right about betting on YORW as the stock returned 11.7% since the end of the third quarter (through 12/8) and outperformed the market by an even larger margin.
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Disclosure: None. This article was originally published at Insider Monkey.