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 September. At Insider Monkey, we follow nearly 900 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) shares haven’t seen a lot of action during the second quarter. Overall, hedge fund sentiment was unchanged. The stock was in 18 hedge funds’ portfolios at the end of the first quarter of 2021. Our calculations also showed that WTS isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings). The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Itron, Inc. (NASDAQ:ITRI), SmileDirectClub, Inc. (NASDAQ:SDC), and Terreno Realty Corporation (NYSE:TRNO) to gather more data points.
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. Hedge funds have more than $3.5 trillion in assets under management, so you can’t expect their entire portfolios to beat the market by large margins. 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 115 percentage points since March 2017 (see the details here). So you can still find a lot of gems by following hedge funds’ moves today.
Michael Gelband of ExodusPoint Capital
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, pet market is growing at a 7% annual rate and is expected to reach $110 billion in 2021. So, we are checking out the 5 best stocks for animal lovers. We go through lists like the 15 best Jim Cramer stocks to identify the next Tesla that will deliver outsized returns. 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 homepage. Now we’re going to review the fresh hedge fund action encompassing Watts Water Technologies Inc (NYSE:WTS).
Do Hedge Funds Think WTS Is A Good Stock To Buy Now?
At first quarter’s end, a total of 18 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 0% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in WTS over the last 23 quarters. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Impax Asset Management held the most valuable stake in Watts Water Technologies Inc (NYSE:WTS), which was worth $249.9 million at the end of the fourth quarter. On the second spot was GAMCO Investors which amassed $90.6 million worth of shares. Renaissance Technologies, Millennium Management, and Citadel Investment Group were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position 0 allocated the biggest weight to Watts Water Technologies Inc (NYSE:WTS), around 1.28% of its 13F portfolio. 0 is also relatively very bullish on the stock, designating 0.8 percent of its 13F equity portfolio to WTS.
Seeing as Watts Water Technologies Inc (NYSE:WTS) has faced a decline in interest from the smart money, it’s safe to say that there is a sect of hedgies that decided to sell off their full holdings in the first quarter. Interestingly, Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital cut the biggest position of the 750 funds followed by Insider Monkey, worth close to $3.3 million in stock. David Harding’s fund, Winton Capital Management, also dropped its stock, about $0.9 million worth. These transactions are intriguing to say the least, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).
Let’s go over hedge fund activity in other stocks similar to Watts Water Technologies Inc (NYSE:WTS). These stocks are Itron, Inc. (NASDAQ:ITRI), SmileDirectClub, Inc. (NASDAQ:SDC), Terreno Realty Corporation (NYSE:TRNO), Taylor Morrison Home Corp (NYSE:TMHC), Six Flags Entertainment Corp (NYSE:SIX), Mercury Systems Inc (NASDAQ:MRCY), and MACOM Technology Solutions Holdings Inc (NASDAQ:MTSI). This group of stocks’ market valuations are closest to WTS’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| ITRI | 29 | 365455 | 23 |
| SDC | 21 | 177116 | -4 |
| TRNO | 12 | 43004 | 3 |
| TMHC | 22 | 218154 | -11 |
| SIX | 37 | 1036490 | -4 |
| MRCY | 17 | 110986 | 7 |
| MTSI | 30 | 201129 | 6 |
| Average | 24 | 307476 | 2.9 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 24 hedge funds with bullish positions and the average amount invested in these stocks was $307 million. That figure was $398 million in WTS’s case. Six Flags Entertainment Corp (NYSE:SIX) is the most popular stock in this table. On the other hand Terreno Realty Corporation (NYSE:TRNO) is the least popular one with only 12 bullish hedge fund positions. Watts Water Technologies Inc (NYSE:WTS) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for WTS is 38.6. 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 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 28.5% in 2021 through July 23rd and still beat the market by 10.1 percentage points. A small number of hedge funds were also right about betting on WTS as the stock returned 23.3% since the end of the first quarter (through 7/23) and outperformed the market by an even larger margin.
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Disclosure: None. This article was originally published at Insider Monkey.
