U.S. Markets closed

How Did Willis Towers Watson Public Limited Company (WLTW) Perform In Comparison to Hedge Fund Favorites in 2019?

Debasis Saha

Amid an overall bull market, many stocks that smart money investors were collectively bullish on surged in 2019. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained 57%. Our research shows that most of the stocks that smart money likes historically generate strong risk-adjusted returns. That's why we weren't surprised when hedge funds’ top 20 large-cap stock picks generated a return of 41.1% in 2019 (through December 23rd) and outperformed the broader market benchmark by 10.1 percentage points.This is why following the smart money sentiment is a useful tool at identifying the next stock to invest in.

Is Willis Towers Watson Public Limited Company (NASDAQ:WLTW) a splendid investment today? The smart money is buying. The number of bullish hedge fund positions went up by 2 recently. Our calculations also showed that WLTW isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video at the end of this article 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. Our research has shown that hedge funds' large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the Russell 2000 ETFs by 40 percentage points since May 2014 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that'll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 27.8% through November 21, 2019. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

[caption id="attachment_364853" align="alignnone" width="992"] William Von Mueffling of Cantillon Capital Management[/caption]

William Von Mueffling - Cantillon Capital Management

We leave no stone unturned when looking for the next great investment idea. For example Discover is offering this insane cashback card, so we look into shorting the stock. 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 even check out this option genius' weekly trade ideas. This December, we recommended Adams Energy as a one-way bet based on an under-the-radar fund manager's investor letter and the stock already gained 20 percent. Keeping this in mind let's check out the latest hedge fund action surrounding Willis Towers Watson Public Limited Company (NASDAQ:WLTW).

How are hedge funds trading Willis Towers Watson Public Limited Company (NASDAQ:WLTW)?

At Q3's end, a total of 35 of the hedge funds tracked by Insider Monkey were long this stock, a change of 6% from one quarter earlier. On the other hand, there were a total of 33 hedge funds with a bullish position in WLTW a year ago. So, let's check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Is WLTW A Good Stock To Buy?

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, William von Mueffling's Cantillon Capital Management has the number one position in Willis Towers Watson Public Limited Company (NASDAQ:WLTW), worth close to $463.5 million, comprising 4.5% of its total 13F portfolio. The second most bullish fund manager is Ken Griffin of Citadel Investment Group, with a $277.8 million position; the fund has 0.1% of its 13F portfolio invested in the stock. Other hedge funds and institutional investors with similar optimism contain David Abrams's Abrams Capital Management, Alex Duran and Scott Hendrickson's Permian Investment Partners and Ric Dillon's Diamond Hill Capital. In terms of the portfolio weights assigned to each position Permian Investment Partners allocated the biggest weight to Willis Towers Watson Public Limited Company (NASDAQ:WLTW), around 27.49% of its 13F portfolio. Abrams Capital Management is also relatively very bullish on the stock, setting aside 6 percent of its 13F equity portfolio to WLTW.

As one would reasonably expect, specific money managers were leading the bulls' herd. Balyasny Asset Management, managed by Dmitry Balyasny, assembled the most valuable call position in Willis Towers Watson Public Limited Company (NASDAQ:WLTW). Balyasny Asset Management had $10.2 million invested in the company at the end of the quarter. Vikas Lunia's Lunia Capital also made a $6 million investment in the stock during the quarter. The other funds with new positions in the stock are Matthew Tewksbury's Stevens Capital Management, Michael Platt and William Reeves's BlueCrest Capital Mgmt., and Paul Marshall and Ian Wace's Marshall Wace.

Let's check out hedge fund activity in other stocks - not necessarily in the same industry as Willis Towers Watson Public Limited Company (NASDAQ:WLTW) but similarly valued. We will take a look at FleetCor Technologies, Inc. (NYSE:FLT), Realty Income Corporation (NYSE:O), DTE Energy Company (NYSE:DTE), and Waste Connections, Inc. (NYSE:WCN). This group of stocks' market values are similar to WLTW's market value.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position FLT,42,2138351,2 O,16,177826,-6 DTE,20,678909,-8 WCN,29,575449,3 Average,26.75,892634,-2.25 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 26.75 hedge funds with bullish positions and the average amount invested in these stocks was $893 million. That figure was $1906 million in WLTW's case. FleetCor Technologies, Inc. (NYSE:FLT) is the most popular stock in this table. On the other hand Realty Income Corporation (NYSE:O) is the least popular one with only 16 bullish hedge fund positions. Willis Towers Watson Public Limited Company (NASDAQ:WLTW) is not the most popular stock in this group but hedge fund interest is still above average. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.1% in 2019 through December 23rd and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. Hedge funds were also right about betting on WLTW, though not to the same extent, as the stock returned 34.1% during 2019 (as of 12/23) and outperformed the market as well. Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

5 Most Popular Stocks Among Hedge Funds

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

Related Content