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Hedge Funds Have Never Been This Bullish On Aqua America Inc (WTR)

Reymerlyn Martin

Before we spend days researching a stock idea we like to take a look at how hedge funds and billionaire investors recently traded that stock. Russell 2000 ETF (IWM) lagged the larger S&P 500 ETF (SPY) by more than 10 percentage points since the end of the third quarter of 2018. This means hedge funds that are allocating a higher percentage of their portfolio to small-cap stocks were probably underperforming the market. However, this also means that as small-cap stocks start to mean revert, these hedge funds will start delivering better returns than the S&P 500 Index funds. In this article, we will take a look at what hedge funds think about Aqua America Inc (NYSE:WTR).

Is Aqua America Inc (NYSE:WTR) a safe investment now? Hedge funds are betting on the stock. The number of bullish hedge fund bets increased by 12 in recent months. Our calculations also showed that WTR 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.

5 Most Popular Stocks Among Hedge Funds

According to most investors, hedge funds are assumed to be slow, outdated financial tools of yesteryear. While there are more than 8000 funds with their doors open at the moment, Our experts look at the aristocrats of this group, approximately 750 funds. These hedge fund managers shepherd most of the smart money's total capital, and by keeping an eye on their unrivaled equity investments, Insider Monkey has revealed numerous investment strategies that have historically exceeded the market. Insider Monkey's flagship short hedge fund strategy outperformed the S&P 500 short ETFs by around 20 percentage points per year since its inception in May 2014. Our portfolio of short stocks lost 27.8% since February 2017 (through November 21st) even though the market was up more than 39% during the same period. We just shared a list of 7 short targets in our latest quarterly update .

[caption id="attachment_758442" align="aligncenter" width="600"] Michael Platt of Bluecrest Capital Management[/caption]

Michael Platt Bluecrest Capital Management

Unlike the largest US hedge funds that are convinced Dow will soar past 40,000 or the world's most bearish hedge fund that's more convinced than ever that a crash is coming, our long-short investment strategy doesn't rely on bull or bear markets to deliver double digit returns. We only rely on the best performing hedge funds' buy/sell signals. Let's review the fresh hedge fund action surrounding Aqua America Inc (NYSE:WTR).

How are hedge funds trading Aqua America Inc (NYSE:WTR)?

Heading into the fourth quarter of 2019, a total of 33 of the hedge funds tracked by Insider Monkey were long this stock, a change of 57% from the second quarter of 2019. By comparison, 13 hedge funds held shares or bullish call options in WTR a year ago. So, let's review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

WTR_dec2019

The largest stake in Aqua America Inc (NYSE:WTR) was held by Zimmer Partners, which reported holding $506.4 million worth of stock at the end of September. It was followed by Impax Asset Management with a $102.2 million position. Other investors bullish on the company included BlueCrest Capital Mgmt., Millennium Management, and Royce & Associates. In terms of the portfolio weights assigned to each position Zimmer Partners allocated the biggest weight to Aqua America Inc (NYSE:WTR), around 5.51% of its portfolio. Water Asset Management is also relatively very bullish on the stock, designating 5.15 percent of its 13F equity portfolio to WTR.

With a general bullishness amongst the heavyweights, some big names have been driving this bullishness. ExodusPoint Capital, managed by Michael Gelband, initiated the biggest position in Aqua America Inc (NYSE:WTR). ExodusPoint Capital had $8.1 million invested in the company at the end of the quarter. Brian Olson, Baehyun Sung, and Jamie Waters's Blackstart Capital also made a $6.2 million investment in the stock during the quarter. The following funds were also among the new WTR investors: Ben Levine, Andrew Manuel and Stefan Renold's LMR Partners, Peter J. Hark's Shelter Harbor Advisors, and Mario Gabelli's GAMCO Investors.

Let's also examine hedge fund activity in other stocks - not necessarily in the same industry as Aqua America Inc (NYSE:WTR) but similarly valued. We will take a look at StoneCo Ltd. (NASDAQ:STNE), Apache Corporation (NYSE:APA), United Rentals, Inc. (NYSE:URI), and Formula One Group (NASDAQ:FWONK). This group of stocks' market caps are similar to WTR's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position STNE,28,1337452,1 APA,26,692560,4 URI,54,1123521,10 FWONK,30,1915502,-2 Average,34.5,1267259,3.25 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 34.5 hedge funds with bullish positions and the average amount invested in these stocks was $1267 million. That figure was $833 million in WTR's case. United Rentals, Inc. (NYSE:URI) is the most popular stock in this table. On the other hand Apache Corporation (NYSE:APA) is the least popular one with only 26 bullish hedge fund positions. Aqua America Inc (NYSE:WTR) 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. 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. Unfortunately WTR wasn't nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); WTR investors were disappointed as the stock returned -0.7% during the first two months of the fourth quarter and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as 70 percent of these stocks already outperformed the market in Q4.

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

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