The first quarter was a breeze as Powell pivoted, and China seemed eager to reach a deal with Trump. Both the S&P 500 and Russell 2000 delivered very strong gains as a result, with the Russell 2000, which is composed of smaller companies, outperforming the large-cap stocks slightly during the first quarter. Unfortunately sentiment shifted in May and August as this time China pivoted and Trump put more pressure on China by increasing tariffs. Fourth quarter brought optimism to the markets and hedge funds’ top 20 stock picks performed spectacularly in this volatile environment. These stocks delivered a total gain of 37.4% through the end of November, vs. a gain of 27.5% for the S&P 500 ETF. In this article we will look at how this market volatility affected the sentiment of hedge funds towards California Water Service Group (NYSE:CWT), and what that likely means for the prospects of the company and its stock.
Is California Water Service Group (NYSE:CWT) a bargain? Investors who are in the know are getting more optimistic. The number of bullish hedge fund bets rose by 3 recently. Our calculations also showed that CWT isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings). CWT was in 15 hedge funds’ portfolios at the end of the third quarter of 2019. There were 12 hedge funds in our database with CWT positions at the end of the previous quarter.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
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 flagship best performing hedge funds strategy returned 91% since May 2014 and outperformed the Russell 2000 ETFs by nearly 40 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
Matthew Hulsizer of PEAK6 Capital
We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world’s largest cannabis market, so we check out this European marijuana stock pitch. One of the most bullish analysts in America just put his money where his mouth is. He says, “I’m investing more today than I did back in early 2009.” So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We also rely on the best performing hedge funds‘ buy/sell signals. We’re going to take a look at the fresh hedge fund action regarding California Water Service Group (NYSE:CWT).
What have hedge funds been doing with California Water Service Group (NYSE:CWT)?
At Q3’s end, a total of 15 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 25% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards CWT over the last 17 quarters. With the smart money’s positions undergoing their usual ebb and flow, there exists an “upper tier” of notable hedge fund managers who were upping their stakes meaningfully (or already accumulated large positions).
According to Insider Monkey’s hedge fund database, Winton Capital Management, managed by David Harding, holds the biggest position in California Water Service Group (NYSE:CWT). Winton Capital Management has a $22.2 million position in the stock, comprising 0.3% of its 13F portfolio. Sitting at the No. 2 spot is GLG Partners, managed by Noam Gottesman, which holds a $11.5 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Remaining members of the smart money that hold long positions consist of Renaissance Technologies, John Overdeck and David Siegel’s Two Sigma Advisors and Brandon Haley’s Holocene Advisors. In terms of the portfolio weights assigned to each position Winton Capital Management allocated the biggest weight to California Water Service Group (NYSE:CWT), around 0.26% of its 13F portfolio. PDT Partners is also relatively very bullish on the stock, setting aside 0.08 percent of its 13F equity portfolio to CWT.
Consequently, specific money managers have been driving this bullishness. Holocene Advisors, managed by Brandon Haley, established the most outsized position in California Water Service Group (NYSE:CWT). Holocene Advisors had $1.7 million invested in the company at the end of the quarter. Paul Tudor Jones’s Tudor Investment Corp also initiated a $1 million position during the quarter. The only other fund with a new position in the stock is Matthew Hulsizer’s PEAK6 Capital Management.
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as California Water Service Group (NYSE:CWT) but similarly valued. We will take a look at Allegheny Technologies Incorporated (NYSE:ATI), Immunomedics, Inc. (NASDAQ:IMMU), WW International, Inc. (NASDAQ:WW), and Quidel Corporation (NASDAQ:QDEL). This group of stocks’ market values resemble CWT’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| ATI | 20 | 155971 | -1 |
| IMMU | 20 | 537294 | -1 |
| WW | 28 | 537184 | 7 |
| QDEL | 14 | 77704 | 0 |
| Average | 20.5 | 327038 | 1.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 20.5 hedge funds with bullish positions and the average amount invested in these stocks was $327 million. That figure was $52 million in CWT’s case. WW International, Inc. (NASDAQ:WW) is the most popular stock in this table. On the other hand Quidel Corporation (NASDAQ:QDEL) is the least popular one with only 14 bullish hedge fund positions. California Water Service Group (NYSE:CWT) 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. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately CWT wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); CWT investors were disappointed as the stock returned -2.5% during the first two months of the fourth quarter and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as 70 percent of these stocks already outperformed the market in Q4.
Disclosure: None. This article was originally published at Insider Monkey.
