Were Hedge Funds Right About Willis Towers Watson Public Limited Company (WLTW)?

In this article you are going to find out whether hedge funds think Willis Towers Watson Public Limited Company (NASDAQ:WLTW) is a good investment right now. We like to check what the smart money thinks first before doing extensive research on a given stock. Although there have been several high profile failed hedge fund picks, the consensus picks among hedge fund investors have historically outperformed the market after adjusting for known risk attributes. It’s not surprising given that hedge funds have access to better information and more resources to predict the winners in the stock market.

Willis Towers Watson Public Limited Company (NASDAQ:WLTW) investors should be aware of an increase in hedge fund interest in recent months. Willis Towers Watson Public Limited Company (NASDAQ:WLTW) was in 49 hedge funds’ portfolios at the end of the second quarter of 2020. The all time high for this statistics is 46. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that WLTW isn’t among the 30 most popular stocks among hedge funds (click for Q2 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 56 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 34% through August 17th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

David Abrams

David Abrams of Abrams Capital Management

At Insider Monkey we scour multiple sources to uncover the next great investment idea. Hedge fund sentiment towards Tesla reached its all time high at the end of 2019 and Tesla shares more than quadrupled this year. We are trying to identify other EV revolution winners, so we are checking out this under-the-radar lithium stock. We go through lists like the 10 most profitable companies in the world 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 to get excerpts of these letters in your inbox. Now let’s take a peek at the new hedge fund action regarding Willis Towers Watson Public Limited Company (NASDAQ:WLTW).

How are hedge funds trading Willis Towers Watson Public Limited Company (NASDAQ:WLTW)?

At Q2’s end, a total of 49 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 14% from the first quarter of 2020. On the other hand, there were a total of 33 hedge funds with a bullish position in WLTW a year ago. With hedge funds’ capital changing hands, there exists a select group of noteworthy hedge fund managers who were boosting their holdings substantially (or already accumulated large positions).

Is WLTW A Good Stock To Buy?

More specifically, Cantillon Capital Management was the largest shareholder of Willis Towers Watson Public Limited Company (NASDAQ:WLTW), with a stake worth $466.7 million reported as of the end of September. Trailing Cantillon Capital Management was Abrams Capital Management, which amassed a stake valued at $215.5 million. Magnetar Capital, Millennium Management, and Carlson Capital 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 Permian Investment Partners allocated the biggest weight to Willis Towers Watson Public Limited Company (NASDAQ:WLTW), around 11.04% of its 13F portfolio. Jet Capital Investors is also relatively very bullish on the stock, earmarking 10.76 percent of its 13F equity portfolio to WLTW.

Now, some big names have been driving this bullishness. Jet Capital Investors, managed by Matthew Mark, assembled the largest position in Willis Towers Watson Public Limited Company (NASDAQ:WLTW). Jet Capital Investors had $52.2 million invested in the company at the end of the quarter. John Orrico’s Water Island Capital also made a $51.8 million investment in the stock during the quarter. The following funds were also among the new WLTW investors: John Bader’s Halcyon Asset Management, Steven Clark’s Omni Partners, and James Dinan’s York Capital Management.

Let’s now take a look at hedge fund activity in other stocks similar to Willis Towers Watson Public Limited Company (NASDAQ:WLTW). We will take a look at RingCentral Inc (NYSE:RNG), PPG Industries, Inc. (NYSE:PPG), ANSYS, Inc. (NASDAQ:ANSS), Okta, Inc. (NASDAQ:OKTA), HP Inc. (NYSE:HPQ), McKesson Corporation (NYSE:MCK), and Public Service Enterprise Group Incorporated (NYSE:PEG). This group of stocks’ market caps resemble WLTW’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
RNG 62 3647093 -5
PPG 36 261423 1
ANSS 40 1322878 9
OKTA 60 1990664 12
HPQ 35 1106876 -8
MCK 61 1958790 -2
PEG 31 649382 -3
Average 46.4 1562444 0.6

View table here if you experience formatting issues.

As you can see these stocks had an average of 46.4 hedge funds with bullish positions and the average amount invested in these stocks was $1562 million. That figure was $2288 million in WLTW’s case. RingCentral Inc (NYSE:RNG) is the most popular stock in this table. On the other hand Public Service Enterprise Group Incorporated (NYSE:PEG) is the least popular one with only 31 bullish hedge fund positions. Willis Towers Watson Public Limited Company (NASDAQ:WLTW) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for WLTW is 69. 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. 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 30% in 2020 through October 23rd and beat the market by 21 percentage points. Unfortunately WLTW wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on WLTW were disappointed as the stock returned 6.9% since the end of June (through 10/23) 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.