Were Hedge Funds Right About Westinghouse Air Brake Technologies Corporation (WAB)?

A whopping number of 13F filings filed with U.S. Securities and Exchange Commission has been processed by Insider Monkey so that individual investors can look at the overall hedge fund sentiment towards the stocks included in their watchlists. These freshly-submitted public filings disclose money managers’ equity positions as of the end of the three-month period that ended June 30th, so let’s proceed with the discussion of the hedge fund sentiment on Westinghouse Air Brake Technologies Corporation (NYSE:WAB).

Westinghouse Air Brake Technologies Corporation (NYSE:WAB) has experienced an increase in activity from the world’s largest hedge funds in recent months. Westinghouse Air Brake Technologies Corporation (NYSE:WAB) was in 46 hedge funds’ portfolios at the end of June. The all time high for this statistic was previously 45. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that WAB isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings).

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. Hedge funds have more than $3.5 trillion in assets under management, so you can’t expect their entire portfolios to beat the market by large margins. Our research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 79 percentage points since March 2017 (see the details here). So you can still find a lot of gems by following hedge funds’ moves today.

Richard S. Pzena of Pzena Investment Management

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, billionaire John Paulson is loading up on the miners, so we are checking out stock pitches like this mining 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. Keeping this in mind let’s take a glance at the key hedge fund action encompassing Westinghouse Air Brake Technologies Corporation (NYSE:WAB).

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

At second quarter’s end, a total of 46 of the hedge funds tracked by Insider Monkey were long this stock, a change of 15% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards WAB over the last 24 quarters. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

More specifically, Pzena Investment Management was the largest shareholder of Westinghouse Air Brake Technologies Corporation (NYSE:WAB), with a stake worth $854.4 million reported as of the end of June. Trailing Pzena Investment Management was Farallon Capital, which amassed a stake valued at $434.1 million. 3G Sahana Capital Management, XN Exponent Advisors, and First Pacific Advisors LLC 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 3G Sahana Capital Management allocated the biggest weight to Westinghouse Air Brake Technologies Corporation (NYSE:WAB), around 30.76% of its 13F portfolio. XN Exponent Advisors is also relatively very bullish on the stock, dishing out 11.77 percent of its 13F equity portfolio to WAB.

As one would reasonably expect, specific money managers were breaking ground themselves. Senator Investment Group, managed by Doug Silverman and Alexander Klabin, initiated the most valuable position in Westinghouse Air Brake Technologies Corporation (NYSE:WAB). Senator Investment Group had $82.3 million invested in the company at the end of the quarter. Robert Joseph Caruso’s Select Equity Group also initiated a $55.9 million position during the quarter. The other funds with brand new WAB positions are Eric W. Mandelblatt’s Soroban Capital Partners, D. E. Shaw’s D E Shaw, and Ray Dalio’s Bridgewater Associates.

Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Westinghouse Air Brake Technologies Corporation (NYSE:WAB) but similarly valued. These stocks are Textron Inc. (NYSE:TXT), Discovery Inc. (NASDAQ:DISCA), Enel Americas S.A. (NYSE:ENIA), argenx SE (NASDAQ:ARGX), BioMarin Pharmaceutical Inc. (NASDAQ:BMRN), Liberty Global plc (NASDAQ:LBTYA), and News Corp (NASDAQ:NWSA). This group of stocks’ market caps resemble WAB’s market cap.

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As you can see these stocks had an average of 30.1 hedge funds with bullish positions and the average amount invested in these stocks was $896 million. That figure was $2824 million in WAB’s case. Discovery Inc. (NASDAQ:DISCA) is the most popular stock in this table. On the other hand Enel Americas S.A. (NYSE:ENIA) is the least popular one with only 7 bullish hedge fund positions. Compared to these stocks Westinghouse Air Brake Technologies Corporation (NYSE:WAB) is more popular among hedge funds. Our overall hedge fund sentiment score for WAB is 90. 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 returned 29.6% in 2021 through November 5th but still managed to beat the market by 3.1 percentage points. Hedge funds were also right about betting on WAB as the stock returned 14.6% since the end of June (through 11/5) and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.

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