Hedge funds and other investment firms that we track manage billions of dollars of their wealthy clients’ money, and needless to say, they are painstakingly thorough when analyzing where to invest this money, as their own wealth also depends on it. Regardless of the various methods used by elite investors like David Tepper and David Abrams, the resources they expend are second-to-none. This is especially valuable when it comes to small-cap stocks, which is where they generate their strongest outperformance, as their resources give them a huge edge when it comes to studying these stocks compared to the average investor, which is why we intently follow their activity in the small-cap space.
Is Mueller Water Products, Inc. (NYSE:MWA) an outstanding investment today? Money managers are in a bullish mood. The number of long hedge fund positions rose by 8 in recent months. Our calculations also showed that MWA isn’t among the 30 most popular stocks among hedge funds. MWA was in 24 hedge funds’ portfolios at the end of December. There were 16 hedge funds in our database with MWA holdings at the end of the previous quarter.
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s flagship best performing hedge funds strategy returned 20.7% year to date (through March 12th) and outperformed the market even though it draws its stock picks among small-cap stocks. This strategy also outperformed the market by 32 percentage points since its inception (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
Let’s take a look at the latest hedge fund action regarding Mueller Water Products, Inc. (NYSE:MWA).
How have hedgies been trading Mueller Water Products, Inc. (NYSE:MWA)?
Heading into the first quarter of 2019, a total of 24 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 50% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in MWA over the last 14 quarters. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Mueller Water Products, Inc. (NYSE:MWA) was held by Impax Asset Management, which reported holding $73.2 million worth of stock at the end of December. It was followed by GAMCO Investors with a $51.7 million position. Other investors bullish on the company included Royce & Associates, Renaissance Technologies, and Millennium Management.
With a general bullishness amongst the heavyweights, specific money managers were breaking ground themselves. Marshall Wace LLP, managed by Paul Marshall and Ian Wace, initiated the largest position in Mueller Water Products, Inc. (NYSE:MWA). Marshall Wace LLP had $8.1 million invested in the company at the end of the quarter. Minhua Zhang’s Weld Capital Management also initiated a $1 million position during the quarter. The other funds with brand new MWA positions are Joel Greenblatt’s Gotham Asset Management, Peter Algert and Kevin Coldiron’s Algert Coldiron Investors, and Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital.
Let’s now review hedge fund activity in other stocks similar to Mueller Water Products, Inc. (NYSE:MWA). We will take a look at Meritor Inc (NYSE:MTOR), Saia Inc (NASDAQ:SAIA), Badger Meter, Inc. (NYSE:BMI), and iKang Healthcare Group Inc (NASDAQ:KANG). This group of stocks’ market caps are similar to MWA’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| MTOR | 20 | 290128 | -4 |
| SAIA | 18 | 48410 | 3 |
| BMI | 12 | 94178 | 3 |
| KANG | 10 | 22578 | -3 |
| Average | 15 | 113824 | -0.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 15 hedge funds with bullish positions and the average amount invested in these stocks was $114 million. That figure was $201 million in MWA’s case. Meritor Inc (NYSE:MTOR) is the most popular stock in this table. On the other hand iKang Healthcare Group Inc (NASDAQ:KANG) is the least popular one with only 10 bullish hedge fund positions. Compared to these stocks Mueller Water Products, Inc. (NYSE:MWA) is more popular among hedge funds. Our calculations showed that top 15 most popular stocks) among hedge funds returned 24.2% through April 22nd and outperformed the S&P 500 ETF (SPY) by more than 7 percentage points. Hedge funds were also right about betting on MWA, though not to the same extent, as the stock returned 20% and outperformed the market as well.
Disclosure: None. This article was originally published at Insider Monkey.
