Impax Asset Management is a hedge fund headquartered in London, England, investing in global stocks with long-term potential which the fund believes are mispriced by the market. Ian Simm, a graduate of both Cambridge and Harvard universities, has managed the company since its formation in 1998. 59% of the almost $1.52 billion equity portfolio is invested in the industrial sector. According to the recent 13F filing, Impax Asset Management’s top picks are Xylem Inc (NYSE:XYL), American Water Works Inc (NYSE:AWK), Pentair Plc (NYSE:PNR) and Watts Water Technologies, Inc (NYSE:WTS).
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We think it is important to analyze hedge fund sentiment regarding different companies for many reasons. For one, many hedge fund managers earned significant wealth over the years by receiving excessive fees in exchange for generating high returns. In order to generate these returns, hedge fund managers need to be very thorough in their research. However, as a side note we should also mention that more and more hedge funds have been significantly underperforming the market lately, due to their popularity and the resulting significant increase in their total Assets Under Management (close to $3 trillion globally). This doesn’t mean that hedge funds are losing their touch at picking stocks, which is why following their activity can still provide interesting and profitable insights for smaller investors. Through backtesting, the founder of Insider Monkey, Dr. Ian Dogan determined that an equally-weighted portfolio that consists of the 50 most popular stocks among hedge funds underperformed the market by seven basis points per month between 1999 and 2012 (read more details about our backtests). This is not surprising, since hedge funds tend to invest mostly in large-cap stocks, because of the aforementioned larger amounts of cash they now have to invest. These stocks are more efficiently priced, hence generate lower returns. On the other hand, a smaller investor can obtain higher returns by investing in the small-cap picks of hedge funds and benefit from those stocks’ price inefficiencies. During the last 2.5+ years, a portfolio that consists of the 15 most popular small-cap ideas of the over 700 funds that we track earned 141% in cumulative returns and beat the S&P 500 ETF (SPY) by over 80 percentage points.
As of the end of the first quarter of 2015, Ian Simm increased his fund’s stake in Xylem Inc (NYSE:XYL) by 111,700 shares to 2.13 million shares valued at $74.60 million. The company designs, manufactures, and applies engineered technologies for the water industry. The company’s financial results published at the end of April showed a slight decrease in revenues to $837 million, a dip of $69 million compared to the same quarter in 2014. However, it did register a promising uptick to $64 million in profit, an increase of $15 million year-over-year. Other stakes in Xylem Inc (NYSE:XYL) are held by Mario Gabelli’s GAMCO Investors and Joel Greenblatt’s Gotham Asset Management.
Impax Asset Management has a position of 1.28 million shares in American Water Works Inc (NYSE:AWK). The stake, valued at $69.53 million was increased by some 58,270 shares during the first three months of 2015. American Water Works Inc provides drinking water, wastewater and other water-related services. The company pays a dividend of $0.34 per share, which gives it a yield of 2.57%. Other shareholders of American Water Works Inc (NYSE:AWK) are John Osterweis’ Osterweis Capital Management, Jim Simons’ Renaissance Technologies and Jonathon Jacobson’s Highfields Capital Management.
Ian Simm’s stake in Pentair Plc (NYSE:PNR) amounts to 1.10 million shares, valued at $69.46 million as of the end of March 2015. The company is a worldwide producer and distributor of products such as water & fluid solutions, valves & controls, and technical solutions. Pentair Plc (NYSE:PNR) had revenue of $1.50 billion during the first quarter of 2015 and reported $0.65 in EPS. Larry Robbins’ Glenview Capital, David Gallo’s Valinor Management and the quant fund D E Shaw are other shareholders of Pentair Plc (NYSE:PNR).
Impax’s stake in Watts Water Technologies, Inc (NYSE:WTS) was drained by 23% compared to the previous quarter. The reduced position stood at 1.04 million shares valued at $57.41 million. Watts Water Technologies, Inc (NYSE:WTS) is a designer, manufacturer and seller of water safety and flow control products. The company’s current stock price is $53.92 per share and the dividend yield is 1.26%. Among the funds we track, we found Mario Gabelli’s GAMCO Investors, Jonathon Jacobson’s Highfields Capital Management and Joel Greenblatt’s Gotham Asset Management with positions in Watts Water Technologies, Inc (NYSE:WTS).
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