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 700 world-class investment firms that we track and now have access to the collective wisdom contained in these filings, which are based on their September 30 holdings, data that is available nowhere else. Should you consider Companhia de Saneamento Basico (NYSE:SBS) for your portfolio? We'll look to this invaluable collective wisdom for the answer.
Companhia de Saneamento Basico (NYSE:SBS) has seen a decrease in support from the world's most elite money managers recently. SBS was in 11 hedge funds' portfolios at the end of the third quarter of 2019. There were 12 hedge funds in our database with SBS holdings at the end of the previous quarter. Our calculations also showed that SBS isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings). Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey's flagship best performing hedge funds strategy returned 91% since May 2014 and outperformed the Russell 2000 ETFs by nearly 40 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That's why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
[caption id="attachment_30621" align="alignnone" width="600"] Cliff Asness of AQR Capital Management[/caption]
We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world's largest cannabis market, so we check out this European marijuana stock pitch. One of the most bullish analysts in America just put his money where his mouth is. He says, "I'm investing more today than I did back in early 2009." So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We also rely on the best performing hedge funds' buy/sell signals. Let's take a gander at the recent hedge fund action surrounding Companhia de Saneamento Basico (NYSE:SBS).
What have hedge funds been doing with Companhia de Saneamento Basico (NYSE:SBS)?
At the end of the third quarter, a total of 11 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -8% from one quarter earlier. On the other hand, there were a total of 11 hedge funds with a bullish position in SBS a year ago. With hedge funds' positions undergoing their usual ebb and flow, there exists a few noteworthy hedge fund managers who were increasing their stakes meaningfully (or already accumulated large positions).
More specifically, AQR Capital Management was the largest shareholder of Companhia de Saneamento Basico (NYSE:SBS), with a stake worth $138.8 million reported as of the end of September. Trailing AQR Capital Management was Renaissance Technologies, which amassed a stake valued at $104 million. Impax Asset Management, Arrowstreet Capital, and GLG Partners 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 Companhia de Saneamento Basico (NYSE:SBS), around 0.91% of its 13F portfolio. AQR Capital Management is also relatively very bullish on the stock, designating 0.16 percent of its 13F equity portfolio to SBS.
Since Companhia de Saneamento Basico (NYSE:SBS) has witnessed declining sentiment from hedge fund managers, it's safe to say that there were a few hedgies who were dropping their full holdings by the end of the third quarter. Intriguingly, Matt Diserio and Disque Deane Jr.'s Water Asset Management dumped the largest investment of the "upper crust" of funds tracked by Insider Monkey, totaling an estimated $2.5 million in stock. Benjamin A. Smith's fund, Laurion Capital Management, also sold off its stock, about $1.2 million worth. These transactions are interesting, as aggregate 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 (NYSE:SBS) but similarly valued. These stocks are Ubiquiti Inc. (NYSE:UI), Zendesk Inc (NYSE:ZEN), Royal Gold, Inc (NASDAQ:RGLD), and Sensata Technologies Holding N.V. (NYSE:ST). This group of stocks' market valuations match SBS's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position UI,16,182015,-1 ZEN,44,1453964,-6 RGLD,25,126740,6 ST,20,1377652,-1 Average,26.25,785093,-0.5 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 26.25 hedge funds with bullish positions and the average amount invested in these stocks was $785 million. That figure was $372 million in SBS's case. Zendesk Inc (NYSE:ZEN) is the most popular stock in this table. On the other hand Ubiquiti Inc. (NYSE:UI) is the least popular one with only 16 bullish hedge fund positions. Compared to these stocks Companhia de Saneamento Basico (NYSE:SBS) is even less popular than UI. Hedge funds clearly dropped the ball on SBS as the stock delivered strong returns, though hedge funds' consensus picks still generated respectable returns. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. A small number of hedge funds were also right about betting on SBS as the stock returned 12.6% during the fourth quarter (through the end of November) and outperformed the market by an even larger margin.
Disclosure: None. This article was originally published at Insider Monkey.