We are still in an overall bull market and many stocks that smart money investors were piling into surged through the end of November. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained 54% and 51% respectively. Hedge funds’ top 3 stock picks returned 41.7% this year and beat the S&P 500 ETFs by 14 percentage points. Investing in index funds guarantees you average returns, not superior returns. We are looking to generate superior returns for our readers. That’s why we believe it isn’t a waste of time to check out hedge fund sentiment before you invest in a stock like AquaVenture Holdings Limited (NYSE:WAAS).
Is AquaVenture Holdings Limited (NYSE:WAAS) a bargain? Investors who are in the know are taking a bullish view. The number of long hedge fund positions inched up by 3 recently. Our calculations also showed that WAAS isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings). WAAS was in 12 hedge funds’ portfolios at the end of the third quarter of 2019. There were 9 hedge funds in our database with WAAS holdings at the end of the previous quarter.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
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. Our research has shown that hedge funds’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the Russell 2000 ETFs by 40 percentage points since May 2014 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 27.8% through November 21, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Philip Hempleman of Ardsley Partners
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. Let’s take a gander at the latest hedge fund action surrounding AquaVenture Holdings Limited (NYSE:WAAS).
What have hedge funds been doing with AquaVenture Holdings Limited (NYSE:WAAS)?
At Q3’s end, a total of 12 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 33% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards WAAS over the last 17 quarters. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Renaissance Technologies was the largest shareholder of AquaVenture Holdings Limited (NYSE:WAAS), with a stake worth $9.9 million reported as of the end of September. Trailing Renaissance Technologies was Ardsley Partners, which amassed a stake valued at $6.9 million. Ariel Investments, Islet Management, and Tudor Investment Corp were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Ardsley Partners allocated the biggest weight to AquaVenture Holdings Limited (NYSE:WAAS), around 1.56% of its 13F portfolio. Islet Management is also relatively very bullish on the stock, designating 0.19 percent of its 13F equity portfolio to WAAS.
As aggregate interest increased, key money managers have been driving this bullishness. Ariel Investments, managed by John W. Rogers, assembled the largest position in AquaVenture Holdings Limited (NYSE:WAAS). Ariel Investments had $2.2 million invested in the company at the end of the quarter. Joseph Samuels’s Islet Management also initiated a $1.5 million position during the quarter. The other funds with brand new WAAS positions are Ken Griffin’s Citadel Investment Group, Richard Driehaus’s Driehaus Capital, and Peter Muller’s PDT Partners.
Let’s now take a look at hedge fund activity in other stocks similar to AquaVenture Holdings Limited (NYSE:WAAS). We will take a look at At Home Group Inc. (NYSE:HOME), Ruth’s Hospitality Group, Inc. (NASDAQ:RUTH), W&T Offshore, Inc. (NYSE:WTI), and Argan, Inc. (NYSE:AGX). This group of stocks’ market values are closest to WAAS’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| HOME | 16 | 201048 | 1 |
| RUTH | 16 | 49546 | 0 |
| WTI | 19 | 73231 | -3 |
| AGX | 11 | 73282 | 1 |
| Average | 15.5 | 99277 | -0.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 15.5 hedge funds with bullish positions and the average amount invested in these stocks was $99 million. That figure was $25 million in WAAS’s case. W&T Offshore, Inc. (NYSE:WTI) is the most popular stock in this table. On the other hand Argan, Inc. (NYSE:AGX) is the least popular one with only 11 bullish hedge fund positions. AquaVenture Holdings Limited (NYSE:WAAS) is not the least popular stock in this group but hedge fund interest is still below average. 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. A small number of hedge funds were also right about betting on WAAS as the stock returned 14.6% during the first two months of Q4 and outperformed the market by an even larger margin.
Disclosure: None. This article was originally published at Insider Monkey.
