Is WAB Stock A Buy or Sell?

We know that hedge funds generate strong, risk-adjusted returns over the long run, therefore imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, smart money investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn’t mean that they don’t have occasional colossal losses; they do (like Melvin Capital’s recent GameStop losses). However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, as the current round of 13F filings has just ended, let’s examine the smart money sentiment towards Westinghouse Air Brake Technologies Corporation (NYSE:WAB).

Is WAB stock a buy or sell? Westinghouse Air Brake Technologies Corporation (NYSE:WAB) investors should pay attention to an increase in support from the world’s most elite money managers in recent months. Westinghouse Air Brake Technologies Corporation (NYSE:WAB) was in 45 hedge funds’ portfolios at the end of the fourth quarter of 2020. The all time high for this statistic is 41. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. There were 38 hedge funds in our database with WAB holdings at the end of September. Our calculations also showed that WAB isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings).

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 124 percentage points since March 2017 (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 13% through November 17th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Richard S. Pzena of Pzena Investment Management

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. Recently Oregon became the first state to legalize psychedelic mushrooms which are shown to have promising results in treating depression, addiction, and PTSD in early stage academic studies. So, we are checking out this psychedelic drug stock idea right now. We go through lists like the 10 best biotech stocks to invest in to pick the next stock that will deliver a 10x return. 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 homepage (or at the end of this article). Keeping this in mind we’re going to review the latest hedge fund action regarding Westinghouse Air Brake Technologies Corporation (NYSE:WAB).

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

At the end of December, a total of 45 of the hedge funds tracked by Insider Monkey were long this stock, a change of 18% from the previous quarter. The graph below displays the number of hedge funds with bullish position in WAB over the last 22 quarters. With the smart money’s positions undergoing their usual ebb and flow, there exists a few key hedge fund managers who were boosting their stakes substantially (or already accumulated large positions).

When looking at the institutional investors followed by Insider Monkey, Richard S. Pzena’s Pzena Investment Management has the largest position in Westinghouse Air Brake Technologies Corporation (NYSE:WAB), worth close to $479.6 million, corresponding to 2.3% of its total 13F portfolio. The second largest stake is held by Farallon Capital, which holds a $365.8 million position; the fund has 2.4% of its 13F portfolio invested in the stock. Other hedge funds and institutional investors with similar optimism comprise Boykin Curry’s Eagle Capital Management, Munir Javeri’s 3G Sahana Capital Management and Robert Rodriguez and Steven Romick’s First Pacific Advisors LLC. In terms of the portfolio weights assigned to each position 3G Sahana Capital Management allocated the biggest weight to Westinghouse Air Brake Technologies Corporation (NYSE:WAB), around 26.64% of its 13F portfolio. XN Exponent Advisors is also relatively very bullish on the stock, designating 10.74 percent of its 13F equity portfolio to WAB.

As one would reasonably expect, key hedge funds have jumped into Westinghouse Air Brake Technologies Corporation (NYSE:WAB) headfirst. XN Exponent Advisors, managed by Gaurav Kapadia, created the most valuable position in Westinghouse Air Brake Technologies Corporation (NYSE:WAB). XN Exponent Advisors had $164.5 million invested in the company at the end of the quarter. Will Cook’s Sunriver Management also made a $32.7 million investment in the stock during the quarter. The other funds with new positions in the stock are John Brennan’s Sirios Capital Management, Richard Schimel and Lawrence Sapanski’s Cinctive Capital Management, and Greg Poole’s Echo Street Capital Management.

Let’s also examine hedge fund activity in other stocks similar to Westinghouse Air Brake Technologies Corporation (NYSE:WAB). These stocks are Wix.Com Ltd (NASDAQ:WIX), Liberty Global plc (NASDAQ:LBTYA), Black Knight, Inc. (NYSE:BKI), Natura &Co Holding S.A. (NYSE:NTCO), Sunrun Inc (NASDAQ:RUN), iQIYI, Inc. (NASDAQ:IQ), and VICI Properties Inc. (NYSE:VICI). This group of stocks’ market valuations resemble WAB’s market valuation.

View table here if you experience formatting issues.

As you can see these stocks had an average of 33.9 hedge funds with bullish positions and the average amount invested in these stocks was $1175 million. That figure was $2349 million in WAB’s case. Sunrun Inc (NASDAQ:RUN) is the most popular stock in this table. On the other hand Natura &Co Holding S.A. (NYSE:NTCO) is the least popular one with only 4 bullish hedge fund positions. Westinghouse Air Brake Technologies Corporation (NYSE:WAB) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for WAB is 86.6. 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 5.3% in 2021 through March 19th and beat the market again by 0.8 percentage points. Unfortunately WAB wasn’t nearly as popular as these 30 stocks and hedge funds that were betting on WAB were disappointed as the stock returned 3.5% since the end of December (through 3/19) 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.