The equity market returns were very disappointing in the third quarter, “thanks” to the slowdown of China’s economy and the weaker-than-expected U.S economic data. It was not entirely clear whether the broader market sell-off made U.S equity valuations undervalued, but it definitely made them more attractive. It is worth mentioning that the Russell 2000 ETF (IWM) underperformed the broad-market S&P 500 ETF by more than 14 percentage points during the period of June 25 through October 30, which clearly points to the fact that most investors, including hedge fund firms and institutional investors, heavily cut their exposure to high-potential (but seemingly riskier) small-cap stocks during the bloody third quarter. So let’s take a glance at the smart money sentiment towards California Water Service Group (NYSE:CWT) and see how it was affected during this time.
California Water Service Group (NYSE:CWT) investors should pay attention to a decrease in hedge fund sentiment recently. California Water Service Group was in 10 hedge funds’ portfolios at the end of the third quarter of 2015. There were 15 hedge funds in our database with California Water Service Group holdings at the end of the previous quarter. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Sibanye Gold Ltd (ADR) (NYSE:SBGL), Renren Inc (NYSE:RENN), and TerraForm Global Inc (NASDAQ:GLBL) to gather more data points.
Follow California Water Service Group (NYSE:CWT)
Follow California Water Service Group (NYSE:CWT)
At the moment there are a large number of gauges market participants have at their disposal to grade publicly traded companies. Two of the most innovative gauges are hedge fund and insider trading indicators. we have shown that, historically, those who follow the top picks of the elite investment managers can trounce the broader indices by a very impressive margin (see the details here).
With all of this in mind, let’s take a look at the new action regarding California Water Service Group (NYSE:CWT).
How have hedgies been trading California Water Service Group (NYSE:CWT)?
Heading into Q4, a total of 10 of the hedge funds tracked by Insider Monkey held long positions in this stock, a 33% plunge from one quarter earlier. With the smart money’s sentiment swirling, there exists a select group of notable hedge fund managers who were upping their stakes substantially (or already accumulated large positions).
According to Insider Monkey’s hedge fund database, Ian Simm’s Impax Asset Management has the biggest position in California Water Service Group (NYSE:CWT), worth close to $40.6 million, accounting for 2.8% of its total 13F portfolio. On Impax Asset Management’s heels is Renaissance Technologies which holds an $8.9 million position; the fund has less than 0.1% of its 13F portfolio invested in the stock. Other peers that hold long positions consist of Israel Englander’s Millennium Management, John Overdeck and David Siegel’s Two Sigma Advisors, and Ken Griffin’s Citadel Investment Group.
Because California Water Service Group (NYSE:CWT) has experienced bearish sentiment from hedge fund managers, it’s easy to see that there exists a select few hedgies that elected to cut their positions entirely during the last quarter. At the top of the heap, Thomas M. Fitzgerald’s Longbow Capital Partners dropped the biggest stake of the 700 funds tracked by Insider Monkey, comprising an estimated $1.1 million in stock, and Chao Ku of Nine Chapters Capital Management was right behind this move, as the fund cut about $0.5 million worth of shares. These transactions are intriguing to say the least, as aggregate hedge fund interest dropped by 5 funds last quarter.
Let’s now take a look at hedge fund activity in other stocks with a market capitalization similar to California Water Service Group (NYSE:CWT). These stocks are Sibanye Gold Ltd (ADR) (NYSE:SBGL), Renren Inc (NYSE:RENN), TerraForm Global Inc (NASDAQ:GLBL), and MiMedx Group Inc (NASDAQ:MDXG).
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| SBGL | 8 | 18153 | -1 |
| RENN | 6 | 8466 | -1 |
| GLBL | 23 | 251228 | 23 |
| MDXG | 17 | 24004 | -5 |
As you can see these stocks had an average of 13.5 hedge funds with bullish positions and the average amount invested in these stocks was $75 million. That figure was $66 million in California Water Service Group’s case. TerraForm Global Inc (NASDAQ:GLBL) is the most popular stock in this table. On the other hand Renren Inc (NYSE:RENN) is the least popular one with only 6 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. In this regard TerraForm might be a better candidate to consider a long position.
