The elite funds run by legendary investors such as Dan Loeb and David Tepper make hundreds of millions of dollars for themselves and their investors by spending enormous resources doing research on small cap stocks that big investment banks don’t follow. Because of their pay structures, they have strong incentive to do the research necessary to beat the market. That’s why we pay close attention to what they think in small cap stocks. In this article, we take a closer look at AquaVenture Holdings Limited (NYSE:WAAS) from the perspective of those elite funds.
Is AquaVenture Holdings Limited (NYSE:WAAS) undervalued? Money managers are in a bullish mood. The number of long hedge fund bets moved up by 1 recently. Our calculations also showed that WAAS isn’t among the 30 most popular stocks among hedge funds. WAAS was in 12 hedge funds’ portfolios at the end of the third quarter of 2018. There were 11 hedge funds in our database with WAAS positions at the end of the previous quarter.
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 market by 18 percentage points since May 2014 through December 3, 2018 (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 24% through December 3, 2018. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
We’re going to take a look at the key hedge fund action regarding AquaVenture Holdings Limited (NYSE:WAAS).
Hedge fund activity in AquaVenture Holdings Limited (NYSE:WAAS)
At the end of the third quarter, a total of 12 of the hedge funds tracked by Insider Monkey were long this stock, a change of 9% from one quarter earlier. By comparison, 4 hedge funds held shares or bullish call options in WAAS heading into this year. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
According to Insider Monkey’s hedge fund database, Ardsley Partners, managed by Philip Hempleman, holds the number one position in AquaVenture Holdings Limited (NYSE:WAAS). Ardsley Partners has a $9.9 million position in the stock, comprising 1.3% of its 13F portfolio. Sitting at the No. 2 spot is Renaissance Technologies, led by Jim Simons, holding a $6.7 million position; less than 0.1%% of its 13F portfolio is allocated to the stock. Remaining hedge funds and institutional investors that are bullish contain Thomas E. Claugus’s GMT Capital, Gregg J. Powers’s Private Capital Management and Daniel Arbess’s Perella Weinberg Partners.
As industrywide interest jumped, some big names have jumped into AquaVenture Holdings Limited (NYSE:WAAS) headfirst. Springbok Capital, managed by Gavin Saitowitz and Cisco J. del Valle, created the biggest position in AquaVenture Holdings Limited (NYSE:WAAS). Springbok Capital had $0 million invested in the company at the end of the quarter.
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as AquaVenture Holdings Limited (NYSE:WAAS) but similarly valued. These stocks are Energy Recovery, Inc. (NASDAQ:ERII), REX American Resources Corp (NYSE:REX), Templeton Emerging Markets Inco (NYSE:TEI), and Kayne Anderson Acquisition Corp. (NASDAQ:KAAC). This group of stocks’ market values are similar to WAAS’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| ERII | 10 | 38216 | 1 |
| REX | 6 | 47658 | 1 |
| TEI | 3 | 43373 | 0 |
| KAAC | 16 | 189486 | -1 |
| Average | 8.75 | 79683 | 0.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 8.75 hedge funds with bullish positions and the average amount invested in these stocks was $80 million. That figure was $24 million in WAAS’s case. Kayne Anderson Acquisition Corp. (NASDAQ:KAAC) is the most popular stock in this table. On the other hand Templeton Emerging Markets Inco (NYSE:TEI) is the least popular one with only 3 bullish hedge fund positions. AquaVenture Holdings Limited (NYSE:WAAS) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. In this regard KAAC might be a better candidate to consider a long position.
Disclosure: None. This article was originally published at Insider Monkey.
