Xylem Inc (XYL): Are Hedge Funds Right About This Stock?

In this article we will check out the progression of hedge fund sentiment towards Xylem Inc (NYSE:XYL) and determine whether it is a good investment right now. We at Insider Monkey like to examine what billionaires and hedge funds think of a company before spending days of research on it. Given their 2 and 20 payment structure, hedge funds have more incentives and resources than the average investor. The funds have access to expert networks and get tips from industry insiders. They also employ numerous Ivy League graduates and MBAs. Like everyone else, hedge funds perform miserably at times, but their consensus picks have historically outperformed the market after risk adjustments.

Xylem Inc (NYSE:XYL) was in 23 hedge funds’ portfolios at the end of March. The all time high for this statistic is 28. XYL investors should pay attention to an increase in enthusiasm from smart money lately. There were 21 hedge funds in our database with XYL positions at the end of the fourth quarter. Our calculations also showed that XYL isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings).

To the average investor there are dozens of metrics market participants employ to value stocks. Two of the most underrated metrics are hedge fund and insider trading signals. Our experts have shown that, historically, those who follow the best picks of the elite money managers can beat the market by a solid amount (see the details here). Also, our monthly newsletter’s portfolio of long stock picks returned 206.8% since March 2017 (through May 2021) and beat the S&P 500 Index by more than 115 percentage points. You can download a sample issue of this newsletter on our website .

Phill Gross Adage Capital Phillip Gross

Phillip Gross of Adage Capital

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, Chuck Schumer recently stated that marijuana legalization will be a Senate priority. So, we are checking out this under the radar stock that will benefit from this. We go through lists like the 10 best battery stocks to pick the next Tesla that will deliver a 10x return. 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. Keeping this in mind let’s go over the key hedge fund action encompassing Xylem Inc (NYSE:XYL).

Do Hedge Funds Think XYL Is A Good Stock To Buy Now?

Heading into the second quarter of 2021, a total of 23 of the hedge funds tracked by Insider Monkey were long this stock, a change of 10% from one quarter earlier. By comparison, 27 hedge funds held shares or bullish call options in XYL 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.

The largest stake in Xylem Inc (NYSE:XYL) was held by Impax Asset Management, which reported holding $657.2 million worth of stock at the end of December. It was followed by GAMCO Investors with a $87.2 million position. Other investors bullish on the company included Montanaro Asset Management, Citadel Investment Group, and AQR Capital Management. In terms of the portfolio weights assigned to each position 0 allocated the biggest weight to Xylem Inc (NYSE:XYL), around 3.36% of its 13F portfolio. 0 is also relatively very bullish on the stock, earmarking 3.28 percent of its 13F equity portfolio to XYL.

Consequently, some big names were breaking ground themselves. Adage Capital Management, managed by Phill Gross and Robert Atchinson, initiated the most valuable position in Xylem Inc (NYSE:XYL). Adage Capital Management had $8.2 million invested in the company at the end of the quarter. Richard SchimeláandáLawrence Sapanski’s Cinctive Capital Management also made a $4.2 million investment in the stock during the quarter. The following funds were also among the new XYL investors: Brandon Haley’s Holocene Advisors, D. E. Shaw’s D E Shaw, and Ryan Tolkin (CIO)’s Schonfeld Strategic Advisors.

Let’s go over hedge fund activity in other stocks similar to Xylem Inc (NYSE:XYL). We will take a look at StoneCo Ltd. (NASDAQ:STNE), The Cooper Companies, Inc. (NYSE:COO), FirstEnergy Corp. (NYSE:FE), MGM Resorts International (NYSE:MGM), Farfetch Limited (NYSE:FTCH), Citizens Financial Group Inc (NYSE:CFG), and Ubiquiti Inc. (NYSE:UI). All of these stocks’ market caps are closest to XYL’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
STNE 39 2157227 -8
COO 43 1378040 12
FE 51 1840599 1
MGM 57 2715848 13
FTCH 57 3095281 10
CFG 41 579075 3
UI 19 278681 0
Average 43.9 1720679 4.4

View table here if you experience formatting issues.

As you can see these stocks had an average of 43.9 hedge funds with bullish positions and the average amount invested in these stocks was $1721 million. That figure was $846 million in XYL’s case. MGM Resorts International (NYSE:MGM) is the most popular stock in this table. On the other hand Ubiquiti Inc. (NYSE:UI) is the least popular one with only 19 bullish hedge fund positions. Xylem Inc (NYSE:XYL) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for XYL is 36.9. 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 23.8% in 2021 through July 16th and beat the market by 7.7 percentage points. A small number of hedge funds were also right about betting on XYL, though not to the same extent, as the stock returned 13.8% since the end of Q1 (through July 16th) and outperformed the market.

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