Do Hedge Funds Love Advanced Drainage Systems Inc (WMS)?

The 700+ hedge funds and money managers tracked by Insider Monkey have already compiled and submitted their 13F filings for the third quarter, which unveil their equity positions as of September 30. We went through these filings, fixed typos and other more significant errors and identified the changes in hedge fund positions. Our extensive review of these public filings is finally over, so this article is set to reveal the smart money sentiment towards Advanced Drainage Systems Inc (NYSE:WMS).

Is Advanced Drainage Systems Inc (NYSE:WMS) ready to rally soon? The best stock pickers are surely becoming more confident. The number of bullish hedge fund bets rose by 2 lately. There were 13 hedge funds in our database with WMS positions at the end of the third quarter. At the end of this article we will also compare WMS to other stocks including Magellan Health Services Inc (NASDAQ:MGLN), Progress Software Corporation (NASDAQ:PRGS), and CYS Investments Inc (NYSE:CYS) to get a better sense of its popularity.

We follow over 700 hedge funds and other institutional investors and by analyzing their quarterly 13F filings, we identify stocks that they are collectively bullish on and develop investment strategies based on this data. One strategy that outperformed the market over the last year involves selecting the 100 best-performing funds and identifying the 30 mid-cap stocks that they are collectively most bullish on. Over the past year, this strategy generated returns of 18%, topping the 8% gain registered by S&P 500 ETFs. We launched this strategy 2.5 years ago and it returned more than 39% since then, vs. 22% gain registered by the S&P 500 ETFs.

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Keeping this in mind, let’s take a peek at the fresh action regarding Advanced Drainage Systems Inc (NYSE:WMS).

Hedge fund activity in Advanced Drainage Systems Inc (NYSE:WMS)

Heading into the fourth quarter of 2016, a total of 13 of the hedge funds tracked by Insider Monkey held long positions in this stock, up 18% from one quarter earlier. By comparison, 12 hedge funds held shares or bullish call options in WMS heading into this year. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

When looking at the institutional investors followed by Insider Monkey, Joel Ramin’s 12 West Capital Management has the largest position in Advanced Drainage Systems Inc (NYSE:WMS), worth close to $87.9 million, corresponding to 12.6% of its total 13F portfolio. On 12 West Capital Management’s heels is Stockbridge Partners, led by Sharlyn C. Heslam, holding a $73.8 million position; the fund has 3.5% of its 13F portfolio invested in the stock. Remaining professional money managers that hold long positions comprise Paul Reeder and Edward Shapiro’s PAR Capital Management, Ian Simm’s Impax Asset Management and Richard S. Meisenberg’s ACK Asset Management. We should note that Impax Asset Management is among our list of the 100 best performing hedge funds which is based on the performance of their 13F long positions in non-microcap stocks.

With a general bullishness amongst the heavyweights, specific money managers were breaking ground themselves. Citadel Investment Group, led by Ken Griffin, initiated the largest position in Advanced Drainage Systems Inc (NYSE:WMS). According to regulatory filings, the fund had $2.3 million invested in the company at the end of the quarter. Paul Marshall and Ian Wace’s Marshall Wace LLP also initiated a $1.1 million position during the quarter. The only other fund with a new position in the stock is John Overdeck and David Siegel’s Two Sigma Advisors.

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Advanced Drainage Systems Inc (NYSE:WMS) but similarly valued. We will take a look at Magellan Health Services Inc (NASDAQ:MGLN), Progress Software Corporation (NASDAQ:PRGS), CYS Investments Inc (NYSE:CYS), and Celestica Inc. (USA) (NYSE:CLS). All of these stocks’ market caps are closest to WMS’s market cap.

As you can see these stocks had an average of 15 hedge funds with bullish positions and the average amount invested in these stocks was $94 million. That figure was $313 million in WMS’s case. Magellan Health Services Inc (NASDAQ:MGLN) is the most popular stock in this table. On the other hand Celestica Inc. (USA) (NYSE:CLS) is the least popular one with only 11 bullish hedge fund positions. Advanced Drainage Systems Inc (NYSE:WMS) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. In this regard MGLN might be a better candidate to consider taking a long position in.

Disclosure: none.