It seems that the masses and most of the financial media hate hedge funds and what they do, but why is this hatred of hedge funds so prominent? At the end of the day, these asset management firms do not gamble the hard-earned money of the people who are on the edge of poverty. Truth be told, most hedge fund managers and other smaller players within this industry are very smart and skilled investors. Of course, they may also make wrong bets in some instances, but no one knows what the future holds and how market participants will react to the bountiful news that floods in each day. The Standard and Poor’s 500 Index returned approximately 5.7% in the 12 months ending October 26 (including dividend payments). Conversely, hedge funds’ 30 preferred S&P 500 stocks (as of June 2018) generated a return of 15.1% during the same 12-month period, with 53% of these stock picks outperforming the broader market benchmark. Coincidence? It might happen to be so, but it is unlikely. Our research covering the last 18 years indicates that hedge funds’ stock picks generate superior risk-adjusted returns. That’s why we believe it isn’t a waste of time to check out hedge fund sentiment before you invest in a stock like Willis Towers Watson Public Limited Company (NASDAQ:WLTW).
Willis Towers Watson Public Limited Company (NASDAQ:WLTW) was in 33 hedge funds’ portfolios at the end of September. WLTW has seen an increase in support from the world’s most elite money managers in recent months. There were 26 hedge funds in our database with WLTW holdings at the end of the previous quarter. Our calculations also showed that WLTW isn’t among the 30 most popular stocks among hedge funds.
To most traders, hedge funds are viewed as worthless, old investment vehicles of years past. While there are greater than 8,000 funds trading at the moment, Our experts hone in on the moguls of this club, around 700 funds. It is estimated that this group of investors preside over bulk of the hedge fund industry’s total capital, and by keeping an eye on their matchless picks, Insider Monkey has discovered many investment strategies that have historically outperformed the S&P 500 index. Insider Monkey’s flagship hedge fund strategy defeated the S&P 500 index by 6 percentage points annually since its inception in May 2014 through early November 2018. We were able to generate large returns even by identifying short candidates. Our portfolio of short stocks lost 24% since February 2017 (through December 3rd) even though the market was up nearly 23% during the same period. We just shared a list of 11 short targets in our latest quarterly update.
We’re going to view the new hedge fund action surrounding 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 fourth quarter of 2018, a total of 33 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 27% from the second quarter of 2018. By comparison, 31 hedge funds held shares or bullish call options in WLTW heading into this year. With hedgefunds’ positions undergoing their usual ebb and flow, there exists a few key hedge fund managers who were adding to their holdings meaningfully (or already accumulated large positions).
More specifically, Cantillon Capital Management was the largest shareholder of Willis Towers Watson Public Limited Company (NASDAQ:WLTW), with a stake worth $346.3 million reported as of the end of September. Trailing Cantillon Capital Management was Cantillon Capital Management, which amassed a stake valued at $346.3 million. Pzena Investment Management, Abrams Capital Management, and D E Shaw were also very fond of the stock, giving the stock large weights in their portfolios.
As aggregate interest increased, key hedge funds have been driving this bullishness. Carlson Capital, managed by Clint Carlson, created the largest position in Willis Towers Watson Public Limited Company (NASDAQ:WLTW). Carlson Capital had $36.1 million invested in the company at the end of the quarter. Will Cook’s Sunriver Management also made a $26.1 million investment in the stock during the quarter. The following funds were also among the new WLTW investors: Israel Englander’s Millennium Management, Steve Cohen’s Point72 Asset Management, and Ron Bobman’s Capital Returns Management.
Let’s now review 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 Citizens Financial Group Inc (NYSE:CFG), AMETEK, Inc. (NYSE:AME), Apache Corporation (NYSE:APA), and Plains All American Pipeline, L.P. (NYSE:PAA). 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 |
|---|---|---|---|
| CFG | 42 | 1556600 | -5 |
| AME | 33 | 1185675 | -4 |
| APA | 26 | 882116 | 9 |
| PAA | 10 | 49421 | 0 |
| Average | 27.75 | 918453 | 0 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 27.75 hedge funds with bullish positions and the average amount invested in these stocks was $918.45 billion. That figure was $2.05 billion in WLTW’s case. Citizens Financial Group Inc (NYSE:CFG) is the most popular stock in this table. On the other hand Plains All American Pipeline, L.P. (NYSE:PAA) is the least popular one with only 10 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. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. In this regard CFG might be a better candidate to consider a long position.
Disclosure: None. This article was originally published at Insider Monkey.
