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Mueller Water Products, Inc. (MWA): Hedge Fund Sentiment Isn’t Sparkling

The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We at Insider Monkey have plowed through 821 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 March 31st, a week after the market trough. In this article we look at what those investors think of Mueller Water Products, Inc. (NYSE:MWA).

Mueller Water Products, Inc. (NYSE:MWA) shares haven’t seen a lot of action during the first quarter. Overall, hedge fund sentiment was unchanged. The stock was in 20 hedge funds’ portfolios at the end of the first quarter of 2020. At the end of this article we will also compare MWA to other stocks including McGrath RentCorp (NASDAQ:MGRC), Employers Holdings, Inc. (NYSE:EIG), and WSFS Financial Corporation (NASDAQ:WSFS) to get a better sense of its popularity.

Video: Watch our video about the top 5 most popular hedge fund stocks.

In the 21st century investor’s toolkit there are tons of gauges investors employ to assess stocks. Two of the most underrated gauges are hedge fund and insider trading indicators. Our researchers have shown that, historically, those who follow the top picks of the best money managers can outpace the broader indices by a significant amount (see the details here).

We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world’s largest cannabis market, so we check out this European marijuana stock pitch. We take a look at lists like the 10 most profitable companies in the world to identify the compounders that are likely to deliver double digit returns. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Now let’s check out the new hedge fund action regarding Mueller Water Products, Inc. (NYSE:MWA).

How have hedgies been trading Mueller Water Products, Inc. (NYSE:MWA)?

Heading into the second quarter of 2020, a total of 20 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 0% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards MWA over the last 18 quarters. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Is MWA A Good Stock To Buy?

The largest stake in Mueller Water Products, Inc. (NYSE:MWA) was held by Impax Asset Management, which reported holding $93.1 million worth of stock at the end of September. It was followed by GAMCO Investors with a $42.4 million position. Other investors bullish on the company included Millennium Management, Cove Street Capital, and Royce & Associates. In terms of the portfolio weights assigned to each position Cove Street Capital allocated the biggest weight to Mueller Water Products, Inc. (NYSE:MWA), around 1.37% of its 13F portfolio. Impax Asset Management is also relatively very bullish on the stock, designating 1.24 percent of its 13F equity portfolio to MWA.

Seeing as Mueller Water Products, Inc. (NYSE:MWA) has witnessed bearish sentiment from the smart money, logic holds that there were a few hedge funds that decided to sell off their entire stakes in the first quarter. Intriguingly, Matt Diserio and Disque Deane Jr.’s Water Asset Management said goodbye to the biggest position of all the hedgies followed by Insider Monkey, valued at about $1.9 million in stock, and Brandon Haley’s Holocene Advisors was right behind this move, as the fund cut about $1.1 million worth. These transactions are interesting, as total hedge fund interest stayed the same (this is a bearish signal in our experience).

Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Mueller Water Products, Inc. (NYSE:MWA) but similarly valued. We will take a look at McGrath RentCorp (NASDAQ:MGRC), Employers Holdings, Inc. (NYSE:EIG), WSFS Financial Corporation (NASDAQ:WSFS), and OSI Systems, Inc. (NASDAQ:OSIS). This group of stocks’ market valuations match MWA’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
MGRC 20 90738 0
EIG 10 52392 -5
WSFS 12 99147 -4
OSIS 15 12739 -5
Average 14.25 63754 -3.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 14.25 hedge funds with bullish positions and the average amount invested in these stocks was $64 million. That figure was $181 million in MWA’s case. McGrath RentCorp (NASDAQ:MGRC) is the most popular stock in this table. On the other hand Employers Holdings, Inc. (NYSE:EIG) is the least popular one with only 10 bullish hedge fund positions. Mueller Water Products, Inc. (NYSE:MWA) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. 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 12.2% in 2020 through June 17th but beat the market by 14.8 percentage points. Unfortunately MWA wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on MWA were disappointed as the stock returned 15.6% during the same time period and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.

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