You probably know from experience that there is not as much information on small-cap companies as there is on large companies. Of course, this makes it really hard and difficult for individual investors to make proper and accurate analysis of certain small-cap companies. However, well-known and successful hedge fund managers like Jeff Ubben, George Soros and Seth Klarman hold the necessary resources and abilities to conduct an extensive stock analysis on small-cap stocks, which enable them to make millions of dollars by identifying potential winners within the small-cap galaxy of stocks. This represents the main reason why Insider Monkey takes notice of the hedge fund activity in these overlooked stocks.
Is Southwest Gas Holdings, Inc. (NYSE:SWX) an excellent investment right now? Hedge funds are taking an optimistic view. The number of long hedge fund bets increased by 4 recently. Our calculations also showed that SWX isn't among the 30 most popular stocks among hedge funds. SWX was in 17 hedge funds' portfolios at the end of December. There were 13 hedge funds in our database with SWX holdings at the end of the previous quarter.
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 market by 32 percentage points since May 2014 through March 12, 2019 (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 27.5% through March 12, 2019. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Let's take a glance at the fresh hedge fund action surrounding Southwest Gas Holdings, Inc. (NYSE:SWX).
Hedge fund activity in Southwest Gas Holdings, Inc. (NYSE:SWX)
At Q4's end, a total of 17 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 31% from the previous quarter. The graph below displays the number of hedge funds with bullish position in SWX over the last 14 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 Southwest Gas Holdings, Inc. (NYSE:SWX) was held by Adage Capital Management, which reported holding $77.5 million worth of stock at the end of September. It was followed by GAMCO Investors with a $65 million position. Other investors bullish on the company included Balyasny Asset Management, AQR Capital Management, and Citadel Investment Group.
With a general bullishness amongst the heavyweights, key money managers have jumped into Southwest Gas Holdings, Inc. (NYSE:SWX) headfirst. Luminus Management, managed by Jonathan Barrett and Paul Segal, established the biggest position in Southwest Gas Holdings, Inc. (NYSE:SWX). Luminus Management had $9.2 million invested in the company at the end of the quarter. Michael Gelband's ExodusPoint Capital also made a $8.7 million investment in the stock during the quarter. The other funds with new positions in the stock are Benjamin A. Smith's Laurion Capital Management, Jim Simons's Renaissance Technologies, and Noam Gottesman's GLG Partners.
Let's check out hedge fund activity in other stocks similar to Southwest Gas Holdings, Inc. (NYSE:SWX). We will take a look at Americold Realty Trust (NYSE:COLD), BWX Technologies Inc (NYSE:BWXT), Black Hills Corporation (NYSE:BKH), and Pegasystems Inc. (NASDAQ:PEGA). This group of stocks' market caps are closest to SWX's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position COLD,16,628764,-5 BWXT,19,85950,2 BKH,17,114198,-2 PEGA,19,527867,-3 Average,17.75,339195,-2 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 17.75 hedge funds with bullish positions and the average amount invested in these stocks was $339 million. That figure was $226 million in SWX's case. BWX Technologies Inc (NYSE:BWXT) is the most popular stock in this table. On the other hand Americold Realty Trust (NYSE:COLD) is the least popular one with only 16 bullish hedge fund positions. Southwest Gas Holdings, Inc. (NYSE:SWX) 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 15 most popular stocks) among hedge funds returned 24.2% through April 22nd and outperformed the S&P 500 ETF (SPY) by more than 7 percentage points. Unfortunately SWX wasn't nearly as popular as these 15 stock (hedge fund sentiment was quite bearish); SWX investors were disappointed as the stock returned 7.5% and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 15 most popular stocks) among hedge funds as 13 of these stocks already outperformed the market this year.
Disclosure: None. This article was originally published at Insider Monkey.