Here is What Hedge Funds Think About American Water Works Company, Inc. (AWK)

In this article we will take a look at whether hedge funds think American Water Works Company, Inc. (NYSE:AWK) is a good investment right now. We check hedge fund and billionaire investor sentiment before delving into hours of research. Hedge funds spend millions of dollars on Ivy League graduates, unconventional data sources, expert networks, and get tips from investment bankers and industry insiders. Sure they sometimes fail miserably, but their consensus stock picks historically outperformed the market after adjusting for known risk factors.

American Water Works Company, Inc. (NYSE:AWK) was in 28 hedge funds’ portfolios at the end of the third quarter of 2021. The all time high for this statistic is 40. AWK has seen a decrease in hedge fund sentiment lately. There were 30 hedge funds in our database with AWK holdings at the end of June. Our calculations also showed that AWK isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings).

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium prices have more than doubled over the past year, so 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. Now we’re going to analyze the new hedge fund action surrounding American Water Works Company, Inc. (NYSE:AWK).

Noam Gottesman of GLG Partners

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

At third quarter’s end, a total of 28 of the hedge funds tracked by Insider Monkey were long this stock, a change of -7% from the previous quarter. The graph below displays the number of hedge funds with bullish position in AWK over the last 25 quarters. With the smart money’s sentiment swirling, there exists a select group of noteworthy hedge fund managers who were upping their stakes significantly (or already accumulated large positions).

Among these funds, Impax Asset Management held the most valuable stake in American Water Works Company, Inc. (NYSE:AWK), which was worth $941.4 million at the end of the third quarter. On the second spot was AQR Capital Management which amassed $62.5 million worth of shares. Adage Capital Management, D E Shaw, and GLG Partners 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 Trellus Management Company allocated the biggest weight to American Water Works Company, Inc. (NYSE:AWK), around 6.36% of its 13F portfolio. Impax Asset Management is also relatively very bullish on the stock, designating 3.87 percent of its 13F equity portfolio to AWK.

Because American Water Works Company, Inc. (NYSE:AWK) has faced a decline in interest from hedge fund managers, it’s safe to say that there were a few fund managers who were dropping their full holdings heading into Q4. Interestingly, Steve Pattyn’s Yaupon Capital dumped the largest investment of all the hedgies watched by Insider Monkey, totaling an estimated $3.4 million in stock. Matthew Hulsizer’s fund, PEAK6 Capital Management, also cut its stock, about $1.1 million worth. These transactions are interesting, as total hedge fund interest fell by 2 funds heading into Q4.

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as American Water Works Company, Inc. (NYSE:AWK) but similarly valued. These stocks are Nokia Corporation (NYSE:NOK), Phillips 66 (NYSE:PSX), Liberty Broadband Corp (NASDAQ:LBRDA), Zimmer Biomet Holdings Inc (NYSE:ZBH), Chunghwa Telecom Co., Ltd (NYSE:CHT), Southwest Airlines Co. (NYSE:LUV), and XPeng Inc. (NYSE:XPEV). This group of stocks’ market valuations are closest to AWK’s market valuation.

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As you can see these stocks had an average of 28.1 hedge funds with bullish positions and the average amount invested in these stocks was $699 million. That figure was $1128 million in AWK’s case. Zimmer Biomet Holdings Inc (NYSE:ZBH) is the most popular stock in this table. On the other hand Chunghwa Telecom Co., Ltd (NYSE:CHT) is the least popular one with only 6 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 50.8. 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 31.1% in 2021 through December 9th and surpassed the market again by 5.1 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 4.4% since the end of September (through 12/9) 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.