Hedge Funds Are Dumping American Water Works Company, Inc. (AWK)

The 800+ hedge funds and famous money managers tracked by Insider Monkey have already compiled and submitted their 13F filings for the first quarter, which unveil their equity positions as of March 31st. We went through these filings, fixed typos and other more significant errors and identified the changes in hedge fund portfolios. Our extensive review of these public filings is finally over, so this article is set to reveal the smart money sentiment towards American Water Works Company, Inc. (NYSE:AWK).

American Water Works Company, Inc. (NYSE:AWK) was in 30 hedge funds’ portfolios at the end of March. The all time high for this statistic is 40. AWK investors should be aware of a decrease in hedge fund sentiment in recent months. There were 36 hedge funds in our database with AWK holdings at the end of December. Our calculations also showed that AWK isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings).

Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Hedge funds have more than $3.5 trillion in assets under management, so you can’t expect their entire portfolios to beat the market by large margins. Our research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 115 percentage points since March 2017 (see the details here). So you can still find a lot of gems by following hedge funds’ moves today.

Paul Marshall of Marshall Wace

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium 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 review the fresh hedge fund action surrounding American Water Works Company, Inc. (NYSE:AWK).

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

At first quarter’s end, a total of 30 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -17% from the fourth quarter of 2020. The graph below displays the number of hedge funds with bullish position in AWK over the last 23 quarters. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

The largest stake in American Water Works Company, Inc. (NYSE:AWK) was held by Impax Asset Management, which reported holding $803.1 million worth of stock at the end of December. It was followed by AQR Capital Management with a $61.9 million position. Other investors bullish on the company included D E Shaw, GLG Partners, and Marshall Wace LLP. In terms of the portfolio weights assigned to each position Impax Asset Management allocated the biggest weight to American Water Works Company, Inc. (NYSE:AWK), around 4.11% of its 13F portfolio. Trellus Management Company is also relatively very bullish on the stock, dishing out 4.01 percent of its 13F equity portfolio to AWK.

Due to the fact that American Water Works Company, Inc. (NYSE:AWK) has faced bearish sentiment from the aggregate hedge fund industry, it’s easy to see that there exists a select few hedgies that decided to sell off their positions entirely last quarter. It’s worth mentioning that Renaissance Technologies cut the biggest stake of all the hedgies tracked by Insider Monkey, comprising about $15.2 million in stock. Matthew Davis’s fund, Coann Capital, also said goodbye to its stock, about $7.8 million worth. These bearish behaviors are important to note, as total hedge fund interest dropped by 6 funds last quarter.

Let’s go over hedge fund activity in other stocks similar to American Water Works Company, Inc. (NYSE:AWK). These stocks are Ameriprise Financial, Inc. (NYSE:AMP), Tyson Foods, Inc. (NYSE:TSN), RingCentral Inc (NYSE:RNG), Mettler-Toledo International Inc. (NYSE:MTD), Ferguson plc (NYSE:FERG), Dollar Tree, Inc. (NASDAQ:DLTR), and Equity Residential (NYSE:EQR). This group of stocks’ market caps match AWK’s market cap.

View table here if you experience formatting issues.

As you can see these stocks had an average of 30.3 hedge funds with bullish positions and the average amount invested in these stocks was $1387 million. That figure was $1110 million in AWK’s case. RingCentral Inc (NYSE:RNG) is the most popular stock in this table. On the other hand Ferguson plc (NYSE:FERG) is the least popular one with only 5 bullish hedge fund positions. American Water Works Company, Inc. (NYSE:AWK) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for AWK is 48.7. 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 22.8% in 2021 through July 2nd and surpassed the market again by 6 percentage points. Unfortunately AWK wasn’t nearly as popular as these 5 stocks (hedge fund sentiment was quite bearish); AWK investors were disappointed as the stock returned 5.1% since the end of March (through 7/2) 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.

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