Hedge funds and other investment firms run by legendary investors like Israel Englander and Ray Dalio are entrusted to manage billions of dollars of accredited investors’ money because they are without peer in the resources they use to identify the best investments for their chosen investment horizon. Moreover, they are more willing to invest a greater amount of their resources in small-cap stocks than big brokerage houses, and this is often where they generate their outperformance, which is why we pay particular attention to their best ideas in this space.
Westinghouse Air Brake Technologies Corp (NYSE:WAB) investors should be aware of an increase in support from the world’s most elite money managers recently. Our calculations also showed that wab isn’t among the 30 most popular stocks among hedge funds.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the market by 18 percentage points since May 2014 through December 3, 2018 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in our short portfolio.
Let’s take a look at the key hedge fund action surrounding Westinghouse Air Brake Technologies Corp (NYSE:WAB).
Hedge fund activity in Westinghouse Air Brake Technologies Corp (NYSE:WAB)
Heading into the fourth quarter of 2018, a total of 18 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 29% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards WAB over the last 13 quarters. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Farallon Capital held the most valuable stake in Westinghouse Air Brake Technologies Corp (NYSE:WAB), which was worth $367.1 million at the end of the third quarter. On the second spot was Park Presidio Capital which amassed $68.2 million worth of shares. Moreover, Adage Capital Management, Columbus Circle Investors, and Scopus Asset Management were also bullish on Westinghouse Air Brake Technologies Corp (NYSE:WAB), allocating a large percentage of their portfolios to this stock.
Consequently, key money managers were breaking ground themselves. Adage Capital Management, managed by Phill Gross and Robert Atchinson, initiated the most outsized position in Westinghouse Air Brake Technologies Corp (NYSE:WAB). Adage Capital Management had $62.9 million invested in the company at the end of the quarter. Alexander Mitchell’s Scopus Asset Management also initiated a $31.5 million position during the quarter. The following funds were also among the new WAB investors: Anand Parekh’s Alyeska Investment Group, Matthew Tewksbury’s Stevens Capital Management, and Richard Driehaus’s Driehaus Capital.
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Westinghouse Air Brake Technologies Corp (NYSE:WAB) but similarly valued. These stocks are LINE Corporation (NYSE:LN), ASE Technology Holding Co., Ltd. (NYSE:ASX), Nordstrom, Inc. (NYSE:JWN), and LKQ Corporation (NASDAQ:LKQ). All of these stocks’ market caps are closest to WAB’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| LN | 5 | 127221 | 1 |
| ASX | 7 | 202861 | -1 |
| JWN | 26 | 389342 | 3 |
| LKQ | 45 | 1250168 | 5 |
| Average | 20.75 | 492398 | 2 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 20.75 hedge funds with bullish positions and the average amount invested in these stocks was $492 million. That figure was $601 million in WAB’s case. LKQ Corporation (NASDAQ:LKQ) is the most popular stock in this table. On the other hand LINE Corporation (NYSE:LN) is the least popular one with only 5 bullish hedge fund positions. Westinghouse Air Brake Technologies Corp (NYSE:WAB) 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 LKQ might be a better candidate to consider a long position.
Disclosure: None. This article was originally published at Insider Monkey.
