Coronavirus is probably the #1 concern in investors’ minds right now. It should be. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW. We predicted that a US recession is imminent and US stocks will go down by at least 20% in the next 3-6 months. We also told you to short the market ETFs and buy long-term bonds. Investors who agreed with us and replicated these trades are up double digits whereas the market is down double digits. Our article also called for a total international travel ban to prevent the spread of the coronavirus especially from Europe. We were one step ahead of the markets and the president (see why hell is coming).
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. Keeping this in mind, let’s analyze whether Watts Water Technologies Inc (NYSE:WTS) is a good investment right now by following the lead of some of the best investors in the world and piggybacking their ideas. There’s no better way to get these firms’ immense resources and analytical capabilities working for us than to follow their lead into their best ideas. While not all of these picks will be winners, our research shows that these picks historically outperformed the market when we factor in known risk factors.
Is Watts Water Technologies Inc (NYSE:WTS) worth your attention right now? Prominent investors are in a pessimistic mood. The number of long hedge fund bets decreased by 5 lately. Our calculations also showed that WTS isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of this article for Q3 rankings).
In the financial world there are dozens of signals stock traders can use to size up their holdings. A couple of the less known signals are hedge fund and insider trading interest. Our experts have shown that, historically, those who follow the top picks of the best investment managers can outperform the S&P 500 by a very impressive amount (see the details here).
We leave no stone unturned when looking for the next great investment idea. For example we recently identified a stock that trades 25% below the net cash on its balance sheet. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences, and go through short-term trade recommendations like this one. We even check out the recommendations of services with hard to believe track records. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Now we’re going to check out the latest hedge fund action surrounding Watts Water Technologies Inc (NYSE:WTS).
How have hedgies been trading Watts Water Technologies Inc (NYSE:WTS)?
Heading into the first quarter of 2020, a total of 19 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -21% from the previous quarter. On the other hand, there were a total of 17 hedge funds with a bullish position in WTS a year ago. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, GAMCO Investors was the largest shareholder of Watts Water Technologies Inc (NYSE:WTS), with a stake worth $98.2 million reported as of the end of September. Trailing GAMCO Investors was Impax Asset Management, which amassed a stake valued at $95 million. Renaissance Technologies, GLG Partners, and Citadel Investment Group 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 Impax Asset Management allocated the biggest weight to Watts Water Technologies Inc (NYSE:WTS), around 1.06% of its 13F portfolio. GAMCO Investors is also relatively very bullish on the stock, earmarking 0.78 percent of its 13F equity portfolio to WTS.
Seeing as Watts Water Technologies Inc (NYSE:WTS) has experienced declining sentiment from the smart money, logic holds that there lies a certain “tier” of hedge funds who sold off their positions entirely heading into Q4. Interestingly, Paul Marshall and Ian Wace’s Marshall Wace LLP dumped the biggest position of the 750 funds monitored by Insider Monkey, worth close to $1.5 million in stock. Minhua Zhang’s fund, Weld Capital Management, also dumped its stock, about $1.3 million worth. These bearish behaviors are intriguing to say the least, as total hedge fund interest fell by 5 funds heading into Q4.
Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Watts Water Technologies Inc (NYSE:WTS) but similarly valued. These stocks are UMB Financial Corporation (NASDAQ:UMBF), MyoKardia, Inc. (NASDAQ:MYOK), GrafTech International Ltd. (NYSE:EAF), and Brookfield Business Partners L.P. (NYSE:BBU). All of these stocks’ market caps match WTS’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| UMBF | 19 | 81425 | 3 |
| MYOK | 26 | 933869 | 1 |
| EAF | 33 | 241631 | 6 |
| BBU | 4 | 9985 | -2 |
| Average | 20.5 | 316728 | 2 |
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 $317 million. That figure was $309 million in WTS’s case. GrafTech International Ltd. (NYSE:EAF) is the most popular stock in this table. On the other hand Brookfield Business Partners L.P. (NYSE:BBU) is the least popular one with only 4 bullish hedge fund positions. Watts Water Technologies Inc (NYSE:WTS) 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 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks lost 17.4% in 2020 through March 25th but beat the market by 5.5 percentage points. A small number of hedge funds were also right about betting on WTS, though not to the same extent, as the stock returned -21.6% during the same time period and outperformed the market.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.
