Hedge Funds Are Selling Consolidated Water Co. Ltd. (CWCO)

How do you pick the next stock to invest in? One way would be to spend days of research browsing through thousands of publicly traded companies. However, an easier way is to look at the stocks that smart money investors are collectively bullish on. Hedge funds and other institutional investors usually invest large amounts of capital and have to conduct due diligence while choosing their next pick. They don’t always get it right, but, on average, their stock picks historically generated strong returns after adjusting for known risk factors. With this in mind, let’s take a look at the recent hedge fund activity surrounding Consolidated Water Co. Ltd. (NASDAQ:CWCO).

Consolidated Water Co. Ltd. (NASDAQ:CWCO) investors should pay attention to a decrease in activity from the world’s largest hedge funds in recent months. Consolidated Water Co. Ltd. (NASDAQ:CWCO) was in 4 hedge funds’ portfolios at the end of the first quarter of 2021. The all time high for this statistic is 9. There were 7 hedge funds in our database with CWCO positions at the end of the fourth quarter. Our calculations also showed that CWCO isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings).

In the financial world there are plenty of formulas investors have at their disposal to assess their stock investments. Two of the most innovative formulas are hedge fund and insider trading sentiment. Our researchers have shown that, historically, those who follow the top picks of the elite fund managers can trounce the broader indices by a significant amount (see the details here). Also, our monthly newsletter’s portfolio of long stock picks returned 206.8% since March 2017 (through May 2021) and beat the S&P 500 Index by more than 115 percentage points. You can download a sample issue of this newsletter on our website .

David Siegel of Two Sigma Advisors

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, an activist hedge fund wants to buy this $29 biotech stock for $50. So, we recommended a long position to our monthly premium newsletter subscribers. We go through lists like the 10 best battery 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 let’s take a glance at the key hedge fund action encompassing Consolidated Water Co. Ltd. (NASDAQ:CWCO).

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

At the end of the first quarter, a total of 4 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -43% from the previous quarter. On the other hand, there were a total of 5 hedge funds with a bullish position in CWCO a year ago. With hedge funds’ sentiment swirling, there exists a few key hedge fund managers who were upping their holdings significantly (or already accumulated large positions).

When looking at the institutional investors followed by Insider Monkey, Renaissance Technologies, holds the biggest position in Consolidated Water Co. Ltd. (NASDAQ:CWCO). Renaissance Technologies has a $7.8 million position in the stock, comprising less than 0.1%% of its 13F portfolio. Coming in second is Arrowstreet Capital, led by Peter Rathjens, Bruce Clarke and John Campbell, holding a $1 million position; less than 0.1%% of its 13F portfolio is allocated to the company. Some other professional money managers that hold long positions contain John Overdeck and David Siegel’s Two Sigma Advisors, Peter Muller’s PDT Partners and . In terms of the portfolio weights assigned to each position PDT Partners allocated the biggest weight to Consolidated Water Co. Ltd. (NASDAQ:CWCO), around 0.01% of its 13F portfolio. Renaissance Technologies is also relatively very bullish on the stock, earmarking 0.01 percent of its 13F equity portfolio to CWCO.

Due to the fact that Consolidated Water Co. Ltd. (NASDAQ:CWCO) has faced declining sentiment from the entirety of the hedge funds we track, we can see that there were a few money managers that decided to sell off their positions entirely last quarter. Interestingly, Cliff Asness’s AQR Capital Management said goodbye to the largest position of the “upper crust” of funds tracked by Insider Monkey, worth an estimated $0.4 million in stock, and David Harding’s Winton Capital Management was right behind this move, as the fund dropped about $0.3 million worth. These bearish behaviors are intriguing to say the least, as total hedge fund interest dropped by 3 funds last quarter.

Let’s go over hedge fund activity in other stocks similar to Consolidated Water Co. Ltd. (NASDAQ:CWCO). These stocks are Spok Holdings Inc (NASDAQ:SPOK), Kuke Music Holding Limited (NYSE:KUKE), AcelRx Pharmaceuticals Inc (NASDAQ:ACRX), Cedar Realty Trust Inc (NYSE:CDR), The Community Financial Corp (NASDAQ:TCFC), BayCom Corp (NASDAQ:BCML), and Sequans Communications SA (NYSE:SQNS). This group of stocks’ market values resemble CWCO’s market value.

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As you can see these stocks had an average of 5.9 hedge funds with bullish positions and the average amount invested in these stocks was $18 million. That figure was $9 million in CWCO’s case. Spok Holdings Inc (NASDAQ:SPOK) is the most popular stock in this table. On the other hand Kuke Music Holding Limited (NYSE:KUKE) is the least popular one with only 2 bullish hedge fund positions. Consolidated Water Co. Ltd. (NASDAQ:CWCO) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for CWCO is 27.8. 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 17.2% in 2021 through June 11th and surpassed the market again by 3.3 percentage points. Unfortunately CWCO wasn’t nearly as popular as these 5 stocks (hedge fund sentiment was quite bearish); CWCO investors were disappointed as the stock returned -2.6% since the end of March (through 6/11) 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.

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