Hedge funds run by legendary names like Nelson Peltz and David Tepper make billions of dollars a year for themselves and their super-rich accredited investors (you’ve got to have a minimum of $1 million liquid to invest in a hedge fund) by spending enormous resources on analyzing and uncovering data about small-cap stocks that the big brokerage houses don’t follow. Small caps are where they can generate significant out-performance. That’s why we pay special attention to hedge fund activity in these stocks.
Is Companhia de Saneamento Basico (ADR) (NYSE:SBS) a sound stock to buy now? Hedge funds are becoming less hopeful. The number of bullish hedge fund positions went down by 1 recently. At the end of this article we will also compare SBS to other stocks including Armstrong World Industries, Inc. (NYSE:AWI), Noble Corporation (NYSE:NE), and Compass Minerals International, Inc. (NYSE:CMP) to get a better sense of its popularity.
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With all of this in mind, we’re going to take a gander at the latest action encompassing Companhia de Saneamento Basico (ADR) (NYSE:SBS).
Hedge fund activity in Companhia de Saneamento Basico (ADR) (NYSE:SBS)
Heading into Q4, a total of 13 of the hedge funds tracked by Insider Monkey were long this stock, a change of -7% from one quarter earlier. With hedge funds’ positions undergoing their usual ebb and flow, there exists a few notable hedge fund managers who were increasing their stakes considerably (or already accumulated large positions).
According to Insider Monkey’s hedge fund database, Paul Singer’s Elliott Management has the number one position in Companhia de Saneamento Basico (ADR) (NYSE:SBS), worth close to $61.7 million, comprising 1.2% of its total 13F portfolio. Coming in second is Impax Asset Management, managed by Ian Simm, which holds a $14.3 million position; the fund has 1% of its 13F portfolio invested in the stock. Some other hedge funds and institutional investors with similar optimism consist of Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital, Israel Englander’s Millennium Management and David Costen Haley’s HBK Investments.
Because Companhia de Saneamento Basico (ADR) (NYSE:SBS) has faced bearish sentiment from the entirety of the hedge funds we track, logic holds that there is a sect of fund managers who sold off their entire stakes by the end of the third quarter. Intriguingly, Mike Vranos’s Ellington dropped the largest investment of the “upper crust” of funds followed by Insider Monkey, comprising close to $0.1 million in stock. Matthew Hulsizer’s fund, PEAK6 Capital Management, also dropped its position in the stock. These bearish behaviors are important to note, as total hedge fund interest dropped by 1 funds by the end of the third quarter.
Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Companhia de Saneamento Basico (ADR) (NYSE:SBS) but similarly valued. We will take a look at Armstrong World Industries, Inc. (NYSE:AWI), Noble Corporation (NYSE:NE), Compass Minerals International, Inc. (NYSE:CMP), and Agios Pharmaceuticals Inc (NASDAQ:AGIO). All of these stocks’ market caps resemble SBS’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| AWI | 37 | 1317888 | 5 |
| NE | 22 | 186718 | -5 |
| CMP | 10 | 82064 | -8 |
| AGIO | 9 | 31267 | -7 |
As you can see these stocks had an average of 19.5 hedge funds with bullish positions and the average amount invested in these stocks was $404 million. That figure was $89 million in SBS’s case. Armstrong World Industries, Inc. (NYSE:AWI) is the most popular stock in this table. On the other hand Agios Pharmaceuticals Inc (NASDAQ:AGIO) is the least popular one with only 9 bullish hedge fund positions. Companhia de Saneamento Basico (ADR) (NYSE:SBS) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. In this regard AWI might be a better candidate to consider a long position.
