With the second-quarter round of 13F filings behind us it is time to take a look at the stocks in which some of the best money managers in the world preferred to invest or sell heading into the third quarter of 2021. One of these stocks was Waters Corporation (NYSE:WAT).
Is Waters Corporation (NYSE:WAT) a buy here? The best stock pickers were getting more bullish. The number of long hedge fund positions increased by 6 in recent months. Waters Corporation (NYSE:WAT) was in 40 hedge funds’ portfolios at the end of the second quarter of 2021. The all time high for this statistic was previously 38. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that WAT isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings). There were 34 hedge funds in our database with WAT positions at the end of the first quarter.
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 185.4% since March 2017 and outperformed the S&P 500 ETFs by more than 79 percentage points (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
Ian Wace of Marshall Wace
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, we like undervalued, EBITDA-positive growth stocks, so we are checking out stock pitches like this emerging biotech stock. We go through lists like the 10 best EV 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. Now we’re going to take a gander at the latest hedge fund action regarding Waters Corporation (NYSE:WAT).
Do Hedge Funds Think WAT Is A Good Stock To Buy Now?
At the end of June, a total of 40 of the hedge funds tracked by Insider Monkey were long this stock, a change of 18% from the previous quarter. On the other hand, there were a total of 38 hedge funds with a bullish position in WAT a year ago. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Waters Corporation (NYSE:WAT) was held by Fundsmith LLP, which reported holding $1523.5 million worth of stock at the end of June. It was followed by Arrowstreet Capital with a $274.6 million position. Other investors bullish on the company included Impax Asset Management, Select Equity Group, and D E Shaw. In terms of the portfolio weights assigned to each position Iron Triangle Partners allocated the biggest weight to Waters Corporation (NYSE:WAT), around 6.05% of its 13F portfolio. Fundsmith LLP is also relatively very bullish on the stock, dishing out 4.22 percent of its 13F equity portfolio to WAT.
Consequently, key money managers have been driving this bullishness. Iron Triangle Partners, managed by Kevin Molloy, created the largest position in Waters Corporation (NYSE:WAT). Iron Triangle Partners had $58.8 million invested in the company at the end of the quarter. Paul Marshall and Ian Wace’s Marshall Wace LLP also made a $1.8 million investment in the stock during the quarter. The following funds were also among the new WAT investors: Matthew Hulsizer’s PEAK6 Capital Management, Ryan Tolkin (CIO)’s Schonfeld Strategic Advisors, and Karim Abbadi and Edward McBride’s Centiva Capital.
Let’s go over hedge fund activity in other stocks similar to Waters Corporation (NYSE:WAT). These stocks are Invitation Homes Inc. (NYSE:INVH), Huntington Bancshares Incorporated (NASDAQ:HBAN), Horizon Therapeutics Public Limited Company (NASDAQ:HZNP), CarMax Inc (NYSE:KMX), TransUnion (NYSE:TRU), DraftKings Inc. (NASDAQ:DKNG), and MGM Resorts International (NYSE:MGM). All of these stocks’ market caps match WAT’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| INVH | 33 | 1131870 | 5 |
| HBAN | 33 | 443477 | 6 |
| HZNP | 56 | 4325284 | 8 |
| KMX | 39 | 1619512 | -7 |
| TRU | 35 | 2609504 | -6 |
| DKNG | 26 | 927908 | -17 |
| MGM | 59 | 2889161 | 2 |
| Average | 40.1 | 1992388 | -1.3 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 40.1 hedge funds with bullish positions and the average amount invested in these stocks was $1992 million. That figure was $2643 million in WAT’s case. MGM Resorts International (NYSE:MGM) is the most popular stock in this table. On the other hand DraftKings Inc. (NASDAQ:DKNG) is the least popular one with only 26 bullish hedge fund positions. Waters Corporation (NYSE:WAT) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for WAT is 61.2. 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. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. 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 21.8% in 2021 through October 11th and surpassed the market again by 4.4 percentage points. Unfortunately WAT wasn’t nearly as popular as these 5 stocks (hedge fund sentiment was quite bearish); WAT investors were disappointed as the stock returned -1.2% since the end of June (through 10/11) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2021.
Follow Waters Corp (NYSE:WAT)
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Disclosure: None. This article was originally published at Insider Monkey.
