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We at Insider Monkey have gone over 817 13F filings that hedge funds and prominent investors are required to file by the SEC The 13F filings show the funds' and investors' portfolio positions as of September 30th. In this article, we look at what those funds think of Watts Water Technologies Inc (NYSE:WTS) based on that data.
Is WTS a good stock to buy now? Investors who are in the know were getting less optimistic. The number of bullish hedge fund bets dropped by 7 in recent months. Watts Water Technologies Inc (NYSE:WTS) was in 18 hedge funds' portfolios at the end of September. The all time high for this statistic is 25. Our calculations also showed that WTS isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video for a quick look at the top 5 stocks).
Video: Watch our video about the top 5 most popular hedge fund stocks.
To most shareholders, hedge funds are viewed as unimportant, old investment tools of the past. While there are more than 8000 funds trading today, We hone in on the top tier of this group, about 850 funds. These money managers oversee most of the smart money's total capital, and by observing their best investments, Insider Monkey has spotted a number of investment strategies that have historically outrun Mr. Market. Insider Monkey's flagship short hedge fund strategy defeated the S&P 500 short ETFs by around 20 percentage points a year since its inception in March 2017. Our portfolio of short stocks lost 13% since February 2017 (through November 17th) even though the market was up 65% during the same period. We just shared a list of 6 short targets in our latest quarterly update .
Paul Marshall of Marshall Wace
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 15 best blue chip stocks to pick the best large-cap stocks to buy. 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 website. With all of this in mind let's review the recent hedge fund action encompassing Watts Water Technologies Inc (NYSE:WTS).
Do Hedge Funds Think WTS Is A Good Stock To Buy Now?
At the end of the third quarter, a total of 18 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -28% from the previous quarter. By comparison, 24 hedge funds held shares or bullish call options in WTS a year ago. So, let's find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Impax Asset Management, managed by Ian Simm, holds the number one position in Watts Water Technologies Inc (NYSE:WTS). Impax Asset Management has a $155.7 million position in the stock, comprising 1.4% of its 13F portfolio. Coming in second is GAMCO Investors, managed by Mario Gabelli, which holds a $81.5 million position; the fund has 0.9% of its 13F portfolio invested in the stock. Other members of the smart money that are bullish consist of Jim Simons (founder)'s Renaissance Technologies, Peter Rathjens, Bruce Clarke and John Campbell's Arrowstreet Capital and Chuck Royce's Royce & Associates. In terms of the portfolio weights assigned to each position Impax Asset Management allocated the biggest weight to Watts Water Technologies Inc (NYSE:WTS), around 1.36% of its 13F portfolio. GAMCO Investors is also relatively very bullish on the stock, dishing out 0.9 percent of its 13F equity portfolio to WTS.
Because Watts Water Technologies Inc (NYSE:WTS) has witnessed a decline in interest from the smart money, it's safe to say that there is a sect of hedge funds who sold off their entire stakes heading into Q4. Intriguingly, Paul Marshall and Ian Wace's Marshall Wace LLP said goodbye to the largest investment of the 750 funds followed by Insider Monkey, valued at close to $3.8 million in stock, and Michael Gelband's ExodusPoint Capital was right behind this move, as the fund cut about $2.2 million worth. These bearish behaviors are interesting, as total hedge fund interest fell by 7 funds heading into Q4.
Let's go over hedge fund activity in other stocks - not necessarily in the same industry as Watts Water Technologies Inc (NYSE:WTS) but similarly valued. We will take a look at Cloudera, Inc. (NYSE:CLDR), PS Business Parks Inc (NYSE:PSB), Hudson Pacific Properties Inc (NYSE:HPP), Black Hills Corporation (NYSE:BKH), Inari Medical, Inc. (NASDAQ:NARI), Air Lease Corp (NYSE:AL), and Vicor Corp (NASDAQ:VICR). All of these stocks' market caps are similar to WTS's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position CLDR,31,768674,-2 PSB,17,83110,-3 HPP,17,311969,-7 BKH,22,128780,0 NARI,14,105958,-5 AL,20,608764,-2 VICR,20,75016,1 Average,20.1,297467,-2.6 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 20.1 hedge funds with bullish positions and the average amount invested in these stocks was $297 million. That figure was $278 million in WTS's case. Cloudera, Inc. (NYSE:CLDR) is the most popular stock in this table. On the other hand Inari Medical, Inc. (NASDAQ:NARI) is the least popular one with only 14 bullish hedge fund positions. Watts Water Technologies Inc (NYSE:WTS) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for WTS is 31.4. 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. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 30.7% in 2020 through December 14th and still beat the market by 15.8 percentage points. A small number of hedge funds were also right about betting on WTS as the stock returned 17.6% since the end of the third quarter (through 12/14) and outperformed the market by an even larger margin.
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Disclosure: None. This article was originally published at Insider Monkey.