IS AQUA Stock A Buy or Sell?

The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We have processed the filings of the more than 887 world-class investment firms that we track and now have access to the collective wisdom contained in these filings, which are based on their December 31st holdings, data that is available nowhere else. Should you consider Evoqua Water Technologies Corp. (NYSE:AQUA) for your portfolio? We’ll look to this invaluable collective wisdom for the answer.

Is AQUA stock a buy? Evoqua Water Technologies Corp. (NYSE:AQUA) was in 26 hedge funds’ portfolios at the end of the fourth quarter of 2020. The all time high for this statistic is 28. AQUA investors should be aware of an increase in enthusiasm from smart money recently. There were 21 hedge funds in our database with AQUA holdings at the end of September. Our calculations also showed that AQUA isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings).

So, why do we pay attention to hedge fund sentiment before making any investment decisions? Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 124 percentage points since March 2017 (see the details here).

Paul Marshall of Marshall Wace

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, the CBD market is growing at a 33% annualized rate, so we are taking a closer look at this under-the-radar hemp stock. We go through lists like the 10 best biotech stocks under $10 to identify the next stock with 10x upside potential. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our website. Now we’re going to check out the fresh hedge fund action encompassing Evoqua Water Technologies Corp. (NYSE:AQUA).

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

At the end of December, a total of 26 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 24% from the previous quarter. By comparison, 21 hedge funds held shares or bullish call options in AQUA a year ago. With the smart money’s positions undergoing their usual ebb and flow, there exists a few key hedge fund managers who were increasing their holdings substantially (or already accumulated large positions).

Among these funds, Impax Asset Management held the most valuable stake in Evoqua Water Technologies Corp. (NYSE:AQUA), which was worth $99.5 million at the end of the fourth quarter. On the second spot was P2 Capital Partners which amassed $95.6 million worth of shares. Marshall Wace LLP, Renaissance Technologies, and Two Sigma Advisors 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 P2 Capital Partners allocated the biggest weight to Evoqua Water Technologies Corp. (NYSE:AQUA), around 6.49% of its 13F portfolio. Jade Capital Advisors is also relatively very bullish on the stock, designating 3.92 percent of its 13F equity portfolio to AQUA.

As aggregate interest increased, specific money managers have been driving this bullishness. Balyasny Asset Management, managed by Dmitry Balyasny, created the most outsized position in Evoqua Water Technologies Corp. (NYSE:AQUA). Balyasny Asset Management had $6.6 million invested in the company at the end of the quarter. Israel Englander’s Millennium Management also made a $6.1 million investment in the stock during the quarter. The following funds were also among the new AQUA investors: Richard Schimel and Lawrence Sapanski’s Cinctive Capital Management, Peter Avellone’s Cartenna Capital, and Matthew L Pinz’s Pinz Capital.

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Evoqua Water Technologies Corp. (NYSE:AQUA) but similarly valued. These stocks are NovaGold Resources Inc. (NYSE:NG), Alkermes Plc (NASDAQ:ALKS), Sogou Inc. (NYSE:SOGO), M.D.C. Holdings, Inc. (NYSE:MDC), Casella Waste Systems Inc. (NASDAQ:CWST), Cracker Barrel Old Country Store, Inc. (NASDAQ:CBRL), and Prelude Therapeutics Incorporated (NASDAQ:PRLD). This group of stocks’ market caps are similar to AQUA’s market cap.

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As you can see these stocks had an average of 19.4 hedge funds with bullish positions and the average amount invested in these stocks was $484 million. That figure was $291 million in AQUA’s case. Alkermes Plc (NASDAQ:ALKS) is the most popular stock in this table. On the other hand Prelude Therapeutics Incorporated (NASDAQ:PRLD) is the least popular one with only 8 bullish hedge fund positions. Evoqua Water Technologies Corp. (NYSE:AQUA) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for AQUA is 78.8. 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 positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 30 most popular stocks among hedge funds returned 81.2% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 26 percentage points. These stocks gained 12.3% in 2021 through April 19th and beat the market again by 0.9 percentage points. Unfortunately AQUA wasn’t nearly as popular as these 30 stocks and hedge funds that were betting on AQUA were disappointed as the stock returned 6.1% since the end of December (through 4/19) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 30 most popular stocks among hedge funds as many of these stocks already outperformed the market since 2019.

Disclosure: None. This article was originally published at Insider Monkey.

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