The market has been volatile in the last few months as the Federal Reserve continued its rate cuts and uncertainty looms over trade negotiations with China. Small cap stocks have been hit hard as a result, as the Russell 2000 ETF (IWM) has underperformed the larger S&P 500 ETF (SPY) by more than 10 percentage points over the last 12 months. SEC filings and hedge fund investor letters indicate that the smart money seems to be paring back their overall long exposure since summer months, though some funds increased their exposure dramatically at the end of Q2 and the beginning of Q3. In this article, we analyze what the smart money thinks of American States Water Co (NYSE:AWR) and find out how it is affected by hedge funds' moves.
Is American States Water Co (NYSE:AWR) a buy right now? Money managers are taking a bearish view. The number of long hedge fund positions were trimmed by 1 in recent months. Our calculations also showed that AWR isn't among the 30 most popular stocks among hedge funds (see the video below). AWR was in 14 hedge funds' portfolios at the end of June. There were 15 hedge funds in our database with AWR holdings at the end of the previous quarter. Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
To most stock holders, hedge funds are assumed to be underperforming, old investment vehicles of years past. While there are over 8000 funds trading at present, Our researchers look at the moguls of this club, about 750 funds. These hedge fund managers preside over most of all hedge funds' total capital, and by observing their inimitable picks, Insider Monkey has formulated various investment strategies that have historically outstripped the S&P 500 index. Insider Monkey's flagship hedge fund strategy beat the S&P 500 index by around 5 percentage points annually since its inception in May 2014. We were able to generate large returns even by identifying short candidates. Our portfolio of short stocks lost 25.7% since February 2017 (through September 30th) even though the market was up more than 33% during the same period. We just shared a list of 10 short targets in our latest quarterly update .
Unlike former hedge manager, Dr. Steve Sjuggerud, who is convinced Dow will soar past 40000, our long-short investment strategy doesn't rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. Let's take a peek at the key hedge fund action surrounding American States Water Co (NYSE:AWR).
Hedge fund activity in American States Water Co (NYSE:AWR)
At Q2's end, a total of 14 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -7% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in AWR over the last 16 quarters. So, let's check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in American States Water Co (NYSE:AWR) was held by Renaissance Technologies, which reported holding $20.7 million worth of stock at the end of March. It was followed by Winton Capital Management with a $19.2 million position. Other investors bullish on the company included GLG Partners, Two Sigma Advisors, and AQR Capital Management.
Seeing as American States Water Co (NYSE:AWR) has experienced falling interest from the entirety of the hedge funds we track, logic holds that there lies a certain "tier" of hedgies that elected to cut their full holdings last quarter. It's worth mentioning that Israel Englander's Millennium Management said goodbye to the largest position of all the hedgies tracked by Insider Monkey, worth close to $4.2 million in stock. Michael Gelband's fund, ExodusPoint Capital, also cut its stock, about $0.2 million worth. These moves are interesting, as total hedge fund interest fell by 1 funds last quarter.
Let's also examine hedge fund activity in other stocks similar to American States Water Co (NYSE:AWR). These stocks are Tenable Holdings, Inc. (NASDAQ:TENB), Finisar Corporation (NASDAQ:FNSR), Nextera Energy Partners LP (NYSE:NEP), and Liberty Expedia Holdings, Inc. (NASDAQ:LEXEA). This group of stocks' market valuations resemble AWR's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position TENB,17,146916,-3 FNSR,15,354017,1 NEP,13,51281,4 LEXEA,30,381843,1 Average,18.75,233514,0.75 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 18.75 hedge funds with bullish positions and the average amount invested in these stocks was $234 million. That figure was $67 million in AWR's case. Liberty Expedia Holdings, Inc. (NASDAQ:LEXEA) is the most popular stock in this table. On the other hand Nextera Energy Partners LP (NYSE:NEP) is the least popular one with only 13 bullish hedge fund positions. American States Water Co (NYSE:AWR) is not the least popular stock in this group but hedge fund interest is still below average. Our calculations showed that top 20 most popular stocks among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. A small number of hedge funds were also right about betting on AWR as the stock returned 19.9% during the same time frame and outperformed the market by an even larger margin.
Disclosure: None. This article was originally published at Insider Monkey.