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Essential Utilities Inc (WTRG): Hedge Funds Are Snapping Up

·6 min read

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 March 31st, so let’s proceed with the discussion of the hedge fund sentiment on Essential Utilities Inc (NYSE:WTRG).

Essential Utilities Inc (NYSE:WTRG) was in 19 hedge funds' portfolios at the end of March. The all time high for this statistic is 35. WTRG shareholders have witnessed an increase in hedge fund interest recently. There were 13 hedge funds in our database with WTRG holdings at the end of December. Our calculations also showed that WTRG isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings).

So, why do we pay attention to hedge fund sentiment before making any investment decisions? Our research has shown that hedge funds' small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 115 percentage points since March 2017 (see the details here). We have been able to outperform the passive index funds by tracking the moves of corporate insiders and hedge funds, and we believe small investors can benefit a lot from reading hedge fund investor letters and 13F filings.

Michael Platt Bluecrest Capital Management
Michael Platt Bluecrest Capital Management

Michael Platt of BlueCrest Capital Mgmt.

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, Chuck Schumer recently stated that marijuana legalization will be a Senate priority. So, we are checking out this under the radar stock that will benefit from this. We go through lists like the 10 best battery 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 look at the new hedge fund action surrounding Essential Utilities Inc (NYSE:WTRG).

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

At the end of March, a total of 19 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 46% from the fourth quarter of 2020. By comparison, 23 hedge funds held shares or bullish call options in WTRG a year ago. So, let's see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Is WTRG A Good Stock To Buy?
Is WTRG A Good Stock To Buy?

Among these funds, Impax Asset Management held the most valuable stake in Essential Utilities Inc (NYSE:WTRG), which was worth $180.8 million at the end of the fourth quarter. On the second spot was Millennium Management which amassed $26.4 million worth of shares. Zimmer Partners, AQR Capital Management, and BlueCrest Capital Mgmt. 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 0 allocated the biggest weight to Essential Utilities Inc (NYSE:WTRG), around 0.93% of its 13F portfolio. 0 is also relatively very bullish on the stock, earmarking 0.29 percent of its 13F equity portfolio to WTRG.

As industrywide interest jumped, key money managers were breaking ground themselves. Millennium Management, managed by Israel Englander, created the largest position in Essential Utilities Inc (NYSE:WTRG). Millennium Management had $26.4 million invested in the company at the end of the quarter. Andrew Weiss's Weiss Asset Management also made a $2.9 million investment in the stock during the quarter. The other funds with brand new WTRG positions are Michael Gelband's ExodusPoint Capital, Dmitry Balyasny's Balyasny Asset Management, and Donald Sussman's Paloma Partners.

Let's go over hedge fund activity in other stocks similar to Essential Utilities Inc (NYSE:WTRG). We will take a look at A. O. Smith Corporation (NYSE:AOS), Apollo Global Management Inc (NYSE:APO), Lear Corporation (NYSE:LEA), Credicorp Ltd. (NYSE:BAP), AGCO Corporation (NYSE:AGCO), Ozon Holdings PLC (NASDAQ:OZON), and Steel Dynamics, Inc. (NASDAQ:STLD). All of these stocks' market caps match WTRG's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position AOS,24,420942,-7 APO,44,2362179,14 LEA,23,1217537,-13 BAP,22,236121,7 AGCO,36,552596,-4 OZON,17,136135,-4 STLD,26,570961,-1 Average,27.4,785210,-1.1 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 27.4 hedge funds with bullish positions and the average amount invested in these stocks was $785 million. That figure was $266 million in WTRG's case. Apollo Global Management Inc (NYSE:APO) is the most popular stock in this table. On the other hand Ozon Holdings PLC (NASDAQ:OZON) is the least popular one with only 17 bullish hedge fund positions. Essential Utilities Inc (NYSE:WTRG) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for WTRG is 30. 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. This is a slightly negative signal and we'd rather spend our time researching stocks that hedge funds are piling on. 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 gained 23.8% in 2021 through July 16th and surpassed the market again by 7.7 percentage points. Unfortunately WTRG wasn't nearly as popular as these 5 stocks (hedge fund sentiment was quite bearish); WTRG investors were disappointed as the stock returned 8.4% since the end of March (through 7/16) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2021.

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