Is WAT 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 Waters Corporation (NYSE:WAT) for your portfolio? We’ll look to this invaluable collective wisdom for the answer.

Is WAT stock a buy?Waters Corporation (NYSE:WAT) has seen a decrease in hedge fund sentiment lately. Waters Corporation (NYSE:WAT) was in 30 hedge funds’ portfolios at the end of December. The all time high for this statistic is 38. Our calculations also showed that WAT 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).

Peter Rathjens of Arrowstreet Capital

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, we heard that billionaire Peter Thiel is backing this psychedelic-drug startup. So, we are taking a closer look at this space. 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. With all of this in mind we’re going to review the fresh hedge fund action encompassing Waters Corporation (NYSE:WAT).

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

At the end of the fourth quarter, a total of 30 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -6% from the third quarter of 2020. By comparison, 27 hedge funds held shares or bullish call options in WAT a year ago. With hedgies’ capital changing hands, there exists an “upper tier” of notable hedge fund managers who were upping their holdings substantially (or already accumulated large positions).

The largest stake in Waters Corporation (NYSE:WAT) was held by Fundsmith LLP, which reported holding $1091.1 million worth of stock at the end of December. It was followed by Impax Asset Management with a $171.3 million position. Other investors bullish on the company included Select Equity Group, D E Shaw, and Arrowstreet Capital. In terms of the portfolio weights assigned to each position Fundsmith LLP allocated the biggest weight to Waters Corporation (NYSE:WAT), around 3.62% of its 13F portfolio. Fairpointe Capital is also relatively very bullish on the stock, setting aside 1.47 percent of its 13F equity portfolio to WAT.

Because Waters Corporation (NYSE:WAT) has faced declining sentiment from the entirety of the hedge funds we track, we can see that there is a sect of hedge funds who sold off their full holdings by the end of the fourth quarter. Interestingly, Steve Cohen’s Point72 Asset Management cut the biggest stake of the “upper crust” of funds followed by Insider Monkey, comprising about $20.2 million in stock, and Jinghua Yan’s TwinBeech Capital was right behind this move, as the fund cut about $2.7 million worth. These moves are interesting, as total hedge fund interest dropped by 2 funds by the end of the fourth quarter.

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Waters Corporation (NYSE:WAT) but similarly valued. These stocks are Hewlett Packard Enterprise Company (NYSE:HPE), Citizens Financial Group Inc (NYSE:CFG), 10x Genomics, Inc. (NASDAQ:TXG), Celanese Corporation (NYSE:CE), NVR, Inc. (NYSE:NVR), Cheniere Energy, Inc. (NYSE:LNG), and Domino’s Pizza, Inc. (NYSE:DPZ). All of these stocks’ market caps resemble WAT’s market cap.

View table here if you experience formatting issues.

As you can see these stocks had an average of 36.4 hedge funds with bullish positions and the average amount invested in these stocks was $1150 million. That figure was $1993 million in WAT’s case. NVR, Inc. (NYSE:NVR) is the most popular stock in this table. On the other hand Hewlett Packard Enterprise Company (NYSE:HPE) is the least popular one with only 30 bullish hedge fund positions. Compared to these stocks Waters Corporation (NYSE:WAT) is even less popular than HPE. Our overall hedge fund sentiment score for WAT is 26.7. 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. Hedge funds clearly dropped the ball on WAT as the stock delivered strong returns, though hedge funds’ consensus picks still generated respectable returns. 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 12.2% in 2021 through April 12th and still beat the market by 1.5 percentage points. A small number of hedge funds were also right about betting on WAT as the stock returned 24.1% since Q4 (through April 12th) and outperformed the market by an even larger margin.

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

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