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Willis Towers Watson (WLTW): Hedge Funds Received The Buy “Signal”

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.

Is Willis Towers Watson Public Limited Company (NASDAQ:WLTW) ready to rally soon? Hedge funds are becoming hopeful. The number of bullish hedge fund positions advanced by 8 in recent months. Our calculations also showed that WLTW isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks). WLTW was in 43 hedge funds’ portfolios at the end of the first quarter of 2020. There were 35 hedge funds in our database with WLTW holdings at the end of the previous quarter.

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

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 monthly stock picks returned 72% since March 2017 and outperformed the S&P 500 ETFs by more than 44 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

David Abrams

David Abrams of Abrams Capital Management

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, we are still not out of the woods in terms of the coronavirus pandemic. So, we checked out this successful trader’s “corona catalyst plays“. 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. Keeping this in mind we’re going to take a look at the fresh hedge fund action regarding Willis Towers Watson Public Limited Company (NASDAQ:WLTW).

What have hedge funds been doing with Willis Towers Watson Public Limited Company (NASDAQ:WLTW)?

Heading into the second quarter of 2020, a total of 43 of the hedge funds tracked by Insider Monkey were long this stock, a change of 23% from the previous quarter. On the other hand, there were a total of 33 hedge funds with a bullish position in WLTW a year ago. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Among these funds, Cantillon Capital Management held the most valuable stake in Willis Towers Watson Public Limited Company (NASDAQ:WLTW), which was worth $398.9 million at the end of the third quarter. On the second spot was Abrams Capital Management which amassed $185.8 million worth of shares. Magnetar Capital, Balyasny Asset 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 Permian Investment Partners allocated the biggest weight to Willis Towers Watson Public Limited Company (NASDAQ:WLTW), around 12.64% of its 13F portfolio. Abrams Capital Management is also relatively very bullish on the stock, setting aside 7.31 percent of its 13F equity portfolio to WLTW.

With a general bullishness amongst the heavyweights, specific money managers have been driving this bullishness. Magnetar Capital, managed by Alec Litowitz and Ross Laser, initiated the most valuable position in Willis Towers Watson Public Limited Company (NASDAQ:WLTW). Magnetar Capital had $172.2 million invested in the company at the end of the quarter. Robert Emil Zoellner’s Alpine Associates also initiated a $43.7 million position during the quarter. The other funds with new positions in the stock are Renaissance Technologies, Sahm Adrangi’s Kerrisdale Capital, and Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital.

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Willis Towers Watson Public Limited Company (NASDAQ:WLTW) but similarly valued. These stocks are McKesson Corporation (NYSE:MCK), Sirius XM Holdings Inc (NASDAQ:SIRI), Southern Copper Corporation (NYSE:SCCO), and Amphenol Corporation (NYSE:APH). This group of stocks’ market valuations are closest to WLTW’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
MCK 63 2073564 12
SIRI 36 1134756 5
SCCO 19 134406 -1
APH 42 604137 6
Average 40 986716 5.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 40 hedge funds with bullish positions and the average amount invested in these stocks was $987 million. That figure was $1654 million in WLTW’s case. McKesson Corporation (NYSE:MCK) is the most popular stock in this table. On the other hand Southern Copper Corporation (NYSE:SCCO) is the least popular one with only 19 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 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 8.3% in 2020 through the end of May but still beat the market by 13.2 percentage points. Hedge funds were also right about betting on WLTW, though not to the same extent, as the stock returned 19.5% during the first two months of the second quarter and outperformed the market as well.

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