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Were Hedge Funds Right About Flocking Into Watts Water Technologies Inc (WTS) ?

Hedge Funds and other institutional investors have just completed filing their 13Fs with the Securities and Exchange Commission, revealing their equity portfolios as of the end of December. At Insider Monkey, we follow nearly 750 active hedge funds and notable investors and by analyzing their 13F filings, we can determine the stocks that they are collectively bullish on. One of their picks is Watts Water Technologies Inc (NYSE:WTS), so let’s take a closer look at the sentiment that surrounds it in the current quarter.

Watts Water Technologies Inc (NYSE:WTS) investors should be aware of an increase in enthusiasm from smart money of late. WTS was in 17 hedge funds’ portfolios at the end of the fourth quarter of 2018. There were 15 hedge funds in our database with WTS positions at the end of the previous quarter. Our calculations also showed that WTS isn’t among the 30 most popular stocks among hedge funds.

In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s flagship best performing hedge funds strategy returned 20.7% year to date (through March 12th) and outperformed the market even though it draws its stock picks among small-cap stocks. This strategy also outperformed the market by 32 percentage points since its inception (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

Mario Gabelli

We’re going to take a glance at the latest hedge fund action encompassing Watts Water Technologies Inc (NYSE:WTS).

Hedge fund activity in Watts Water Technologies Inc (NYSE:WTS)

Heading into the first quarter of 2019, a total of 17 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 13% from the second quarter of 2018. On the other hand, there were a total of 13 hedge funds with a bullish position in WTS a year ago. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

WTS_apr2019

The largest stake in Watts Water Technologies Inc (NYSE:WTS) was held by Impax Asset Management, which reported holding $163.2 million worth of stock at the end of December. It was followed by GAMCO Investors with a $76.2 million position. Other investors bullish on the company included Renaissance Technologies, Royce & Associates, and Millennium Management.

As one would reasonably expect, key money managers were breaking ground themselves. Weld Capital Management, managed by Minhua Zhang, assembled the biggest position in Watts Water Technologies Inc (NYSE:WTS). Weld Capital Management had $1.1 million invested in the company at the end of the quarter. Paul Marshall and Ian Wace’s Marshall Wace LLP also initiated a $0.4 million position during the quarter. The only other fund with a new position in the stock is Paul Tudor Jones’s Tudor Investment Corp.

Let’s also examine hedge fund activity in other stocks similar to Watts Water Technologies Inc (NYSE:WTS). These stocks are Sanderson Farms, Inc. (NASDAQ:SAFM), Novanta Inc. (NASDAQ:NOVT), Ultragenyx Pharmaceutical Inc (NASDAQ:RARE), and Shenandoah Telecommunications Company (NASDAQ:SHEN). This group of stocks’ market values match WTS’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
SAFM 13 358982 -2
NOVT 19 105167 2
RARE 14 105874 -3
SHEN 11 95482 -3
Average 14.25 166376 -1.5

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 $166 million. That figure was $274 million in WTS’s case. Novanta Inc. (NASDAQ:NOVT) is the most popular stock in this table. On the other hand Shenandoah Telecommunications Company (NASDAQ:SHEN) is the least popular one with only 11 bullish hedge fund positions. Watts Water Technologies Inc (NYSE:WTS) is not the most popular stock in this group but hedge fund interest is still above average. Our calculations showed that top 15 most popular stocks) among hedge funds returned 24.2% through April 22nd and outperformed the S&P 500 ETF (SPY) by more than 7 percentage points. Hedge funds were also right about betting on WTS as the stock returned 31.5% and outperformed the market by an even larger margin. Hedge funds were rewarded for their relative bullishness.

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

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