Should You Buy American Water Works Co., Inc. (NYSE:AWK)?

Is American Water Works Co., Inc. (NYSE:AWK) an outstanding stock to buy now? Money managers are taking a bullish view. The number of long hedge fund bets inched up by 1 recently.

According to most investors, hedge funds are perceived as underperforming, outdated investment tools of the past. While there are greater than 8000 funds trading at present, we at Insider Monkey choose to focus on the moguls of this club, around 450 funds. It is estimated that this group has its hands on the lion’s share of the smart money’s total asset base, and by tracking their top equity investments, we have found a few investment strategies that have historically outpaced the S&P 500 index. Our small-cap hedge fund strategy outpaced the S&P 500 index by 18 percentage points annually for a decade in our back tests, and since we’ve began to sharing our picks with our subscribers at the end of August 2012, we have trumped the S&P 500 index by 25 percentage points in 6.5 month (see the details here).

Equally as key, positive insider trading activity is a second way to parse down the financial markets. Just as you’d expect, there are a number of reasons for an upper level exec to downsize shares of his or her company, but just one, very clear reason why they would buy. Many academic studies have demonstrated the market-beating potential of this tactic if shareholders know what to do (learn more here).

Now, it’s important to take a glance at the key action encompassing American Water Works Co., Inc. (NYSE:AWK).

How are hedge funds trading American Water Works Co., Inc. (NYSE:AWK)?

At year’s end, a total of 22 of the hedge funds we track were bullish in this stock, a change of 5% from one quarter earlier. With hedge funds’ sentiment swirling, there exists an “upper tier” of notable hedge fund managers who were upping their stakes meaningfully.

Of the funds we track, John Osterweis’s Osterweis Capital Management had the biggest position in American Water Works Co., Inc. (NYSE:AWK), worth close to $87 million, comprising 3.9% of its total 13F portfolio. On Osterweis Capital Management’s heels is Carlson Capital, managed by Clint Carlson, which held a $34 million position; 0% of its 13F portfolio is allocated to the stock. Some other peers with similar optimism include Jim Simons’s Renaissance Technologies, Robert B. Gillam’s McKinley Capital Management and Malcolm Fairbairn’s Ascend Capital.

Consequently, some big names have jumped into American Water Works Co., Inc. (NYSE:AWK) headfirst. Highbridge Capital Management, managed by Glenn Russell Dubin, initiated the largest position in American Water Works Co., Inc. (NYSE:AWK). Highbridge Capital Management had 1 million invested in the company at the end of the quarter. David Costen Haley’s HBK Investments also initiated a $1 million position during the quarter.

How are insiders trading American Water Works Co., Inc. (NYSE:AWK)?

Insider buying is best served when the primary stock in question has seen transactions within the past half-year. Over the last half-year time frame, American Water Works Co., Inc. (NYSE:AWK) has seen zero unique insiders purchasing, and 6 insider sales (see the details of insider trades here).

With the results exhibited by Insider Monkey’s time-tested strategies, everyday investors must always pay attention to hedge fund and insider trading sentiment, and American Water Works Co., Inc. (NYSE:AWK) is no exception.

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Insider Monkey’s small-cap strategy returned 29.2% between September 2012 and February 2013 versus 8.7% for the S&P 500 index. Try it now by clicking the link above.