Our extensive research has shown that imitating the smart money can generate significant returns for retail investors, which is why we track nearly 900 active prominent money managers and analyze their quarterly 13F filings. The stocks that are heavily bought by hedge funds historically outperformed the market, though there is no shortage of high profile failures like hedge funds’ 2018 losses in Facebook and Apple. Let’s take a closer look at what the funds we track think about Mueller Water Products, Inc. (NYSE:MWA) in this article.
Is Mueller Water Products, Inc. (NYSE:MWA) the right pick for your portfolio? Investors who are in the know were becoming more confident. The number of long hedge fund bets increased by 2 recently. Mueller Water Products, Inc. (NYSE:MWA) was in 22 hedge funds’ portfolios at the end of the second quarter of 2021. The all time high for this statistic is 25. Our calculations also showed that MWA isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings). There were 20 hedge funds in our database with MWA positions at the end of the first 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’ 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 79 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 underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.
Michael Gelband of ExodusPoint Capital
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. We go through lists like the 10 best EV stocks to pick the next Tesla 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. Now let’s go over the recent hedge fund action encompassing Mueller Water Products, Inc. (NYSE:MWA).
Do Hedge Funds Think MWA Is A Good Stock To Buy Now?
Heading into the third quarter of 2021, a total of 22 of the hedge funds tracked by Insider Monkey were long this stock, a change of 10% from the first quarter of 2020. Below, you can check out the change in hedge fund sentiment towards MWA over the last 24 quarters. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Impax Asset Management held the most valuable stake in Mueller Water Products, Inc. (NYSE:MWA), which was worth $183.7 million at the end of the second quarter. On the second spot was GAMCO Investors which amassed $58.3 million worth of shares. Arrowstreet Capital, ExodusPoint Capital, and Millennium Management were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Impax Asset Management allocated the biggest weight to Mueller Water Products, Inc. (NYSE:MWA), around 0.81% of its 13F portfolio. GAMCO Investors is also relatively very bullish on the stock, earmarking 0.49 percent of its 13F equity portfolio to MWA.
As one would reasonably expect, key hedge funds have jumped into Mueller Water Products, Inc. (NYSE:MWA) headfirst. PEAK6 Capital Management, managed by Matthew Hulsizer, initiated the largest position in Mueller Water Products, Inc. (NYSE:MWA). PEAK6 Capital Management had $0.8 million invested in the company at the end of the quarter. Ken Griffin’s Citadel Investment Group also made a $0.3 million investment in the stock during the quarter. The other funds with brand new MWA positions are Joel Greenblatt’s Gotham Asset Management, Matthew L Pinz’s Pinz Capital, and Renee Yao’s Neo Ivy Capital.
Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Mueller Water Products, Inc. (NYSE:MWA) but similarly valued. These stocks are Cornerstone Building Brands, Inc. (NYSE:CNR), Winnebago Industries, Inc. (NYSE:WGO), Coeur Mining, Inc. (NYSE:CDE), Inter Parfums, Inc. (NASDAQ:IPAR), Avaya Holdings Corp. (NYSE:AVYA), Harmony Gold Mining Co. (NYSE:HMY), and Hub Group Inc (NASDAQ:HUBG). All of these stocks’ market caps resemble MWA’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| CNR | 20 | 153153 | -7 |
| WGO | 24 | 376249 | -6 |
| CDE | 19 | 59464 | 1 |
| IPAR | 19 | 100882 | 10 |
| AVYA | 37 | 435949 | 0 |
| HMY | 11 | 102386 | 3 |
| HUBG | 24 | 205728 | 5 |
| Average | 22 | 204830 | 0.9 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 22 hedge funds with bullish positions and the average amount invested in these stocks was $205 million. That figure was $290 million in MWA’s case. Avaya Holdings Corp. (NYSE:AVYA) is the most popular stock in this table. On the other hand Harmony Gold Mining Co. (NYSE:HMY) is the least popular one with only 11 bullish hedge fund positions. Mueller Water Products, Inc. (NYSE:MWA) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for MWA is 54.6. 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. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 24% in 2021 through October 22nd and still beat the market by 1.6 percentage points. A small number of hedge funds were also right about betting on MWA as the stock returned 13.1% since the end of the second quarter (through 10/22) and outperformed the market by an even larger margin.
Follow Mueller Water Products Inc. (NYSE:MWA)
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Disclosure: None. This article was originally published at Insider Monkey.
