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 (10 coronavirus predictions).
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. 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 835 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 31 holdings, data that is available nowhere else. Should you consider Companhia de Saneamento Basico do Estado de Sao Paulo – SABESP (NYSE:SBS) for your portfolio? We’ll look to this invaluable collective wisdom for the answer.
Companhia de Saneamento Basico do Estado de Sao Paulo – SABESP (NYSE:SBS) shareholders have witnessed an increase in hedge fund sentiment of late. SBS was in 12 hedge funds’ portfolios at the end of December. There were 11 hedge funds in our database with SBS positions at the end of the previous quarter. Our calculations also showed that SBS 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).
To the average investor there are a large number of gauges shareholders put to use to grade publicly traded companies. A duo of the most underrated gauges are hedge fund and insider trading sentiment. We have shown that, historically, those who follow the best picks of the elite investment managers can outclass the broader indices by a significant margin (see the details here).
Dmitry Balyasny of Balyasny Asset Management
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. With all of this in mind let’s check out the new hedge fund action regarding Companhia de Saneamento Basico do Estado de Sao Paulo – SABESP (NYSE:SBS).
Hedge fund activity in Companhia de Saneamento Basico do Estado de Sao Paulo – SABESP (NYSE:SBS)
At the end of the fourth quarter, a total of 12 of the hedge funds tracked by Insider Monkey were long this stock, a change of 9% from the previous quarter. By comparison, 17 hedge funds held shares or bullish call options in SBS a year ago. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Companhia de Saneamento Basico do Estado de Sao Paulo – SABESP (NYSE:SBS) was held by Renaissance Technologies, which reported holding $135.2 million worth of stock at the end of September. It was followed by AQR Capital Management with a $128.9 million position. Other investors bullish on the company included Impax Asset Management, Arrowstreet Capital, and Two Sigma Advisors. In terms of the portfolio weights assigned to each position Water Asset Management allocated the biggest weight to Companhia de Saneamento Basico do Estado de Sao Paulo – SABESP (NYSE:SBS), around 1.85% of its 13F portfolio. Impax Asset Management is also relatively very bullish on the stock, earmarking 1.3 percent of its 13F equity portfolio to SBS.
Now, specific money managers have jumped into Companhia de Saneamento Basico do Estado de Sao Paulo – SABESP (NYSE:SBS) headfirst. Marshall Wace LLP, managed by Paul Marshall and Ian Wace, established the biggest position in Companhia de Saneamento Basico do Estado de Sao Paulo – SABESP (NYSE:SBS). Marshall Wace LLP had $1 million invested in the company at the end of the quarter. Matt Diserio and Disque Deane Jr.’s Water Asset Management also initiated a $0.8 million position during the quarter. The only other fund with a new position in the stock is Dmitry Balyasny’s Balyasny Asset Management.
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Companhia de Saneamento Basico do Estado de Sao Paulo – SABESP (NYSE:SBS) but similarly valued. We will take a look at Camden Property Trust (NYSE:CPT), Huntington Ingalls Industries Inc (NYSE:HII), CrowdStrike Holdings, Inc. (NASDAQ:CRWD), and E*TRADE Financial Corporation (NASDAQ:ETFC). This group of stocks’ market caps are similar to SBS’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| CPT | 31 | 471165 | 9 |
| HII | 22 | 596671 | 3 |
| CRWD | 48 | 613093 | 19 |
| ETFC | 48 | 946730 | 4 |
| Average | 37.25 | 656915 | 8.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 37.25 hedge funds with bullish positions and the average amount invested in these stocks was $657 million. That figure was $447 million in SBS’s case. CrowdStrike Holdings, Inc. (NASDAQ:CRWD) is the most popular stock in this table. On the other hand Huntington Ingalls Industries Inc (NYSE:HII) is the least popular one with only 22 bullish hedge fund positions. Compared to these stocks Companhia de Saneamento Basico do Estado de Sao Paulo – SABESP (NYSE:SBS) is even less popular than HII. Hedge funds dodged a bullet by taking a bearish stance towards SBS. Our calculations showed that the top 20 most popular hedge fund stocks returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks lost 22.3% in 2020 through March 16th but managed to beat the market by 3.2 percentage points. Unfortunately SBS wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); SBS investors were disappointed as the stock returned -43% during the same time period and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as most of these stocks already outperformed the market so far in Q1.
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.
