Is Wabtec Corporation (NYSE:WAB) a good place to invest some of your money right now? We can gain invaluable insight to help us answer that question by studying the investment trends of top investors, who employ world-class Ivy League graduates, who are given immense resources and industry contacts to put their financial expertise to work. The top picks of these firms have historically outperformed the market when we account for known risk factors, making them very valuable investment ideas.
Is WAB a good stock to buy now? Wabtec Corporation (NYSE:WAB) investors should pay attention to a decrease in activity from the world's largest hedge funds lately. Wabtec Corporation (NYSE:WAB) was in 38 hedge funds' portfolios at the end of the third quarter of 2020. The all time high for this statistic is 41. There were 39 hedge funds in our database with WAB holdings at the end of June. Our calculations also showed that WAB 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 the average investor there are several signals shareholders employ to assess their holdings. A duo of the most useful signals are hedge fund and insider trading interest. We have shown that, historically, those who follow the top picks of the best hedge fund managers can outperform the market by a healthy margin (see the details here).
Boykin Curry of Eagle Capital
With all of this in mind we're going to go over the fresh hedge fund action regarding Wabtec Corporation (NYSE:WAB).
Do Hedge Funds Think WAB Is A Good Stock To Buy Now?
At the end of September, a total of 38 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -3% from the previous quarter. By comparison, 36 hedge funds held shares or bullish call options in WAB a year ago. So, let's examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Pzena Investment Management held the most valuable stake in Wabtec Corporation (NYSE:WAB), which was worth $399.1 million at the end of the third quarter. On the second spot was Farallon Capital which amassed $336.6 million worth of shares. Eagle Capital Management, 3G Sahana Capital Management, and First Pacific Advisors LLC 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 3G Sahana Capital Management allocated the biggest weight to Wabtec Corporation (NYSE:WAB), around 25.42% of its 13F portfolio. Clearfield Capital is also relatively very bullish on the stock, designating 9.39 percent of its 13F equity portfolio to WAB.
Judging by the fact that Wabtec Corporation (NYSE:WAB) has experienced a decline in interest from hedge fund managers, it's safe to say that there is a sect of funds who were dropping their positions entirely heading into Q4. It's worth mentioning that Robert Bishop's Impala Asset Management cut the biggest investment of all the hedgies watched by Insider Monkey, worth an estimated $6.7 million in stock. Jinghua Yan's fund, TwinBeech Capital, also sold off its stock, about $2.5 million worth. These bearish behaviors are intriguing to say the least, as total hedge fund interest dropped by 1 funds heading into Q4.
Let's now take a look at hedge fund activity in other stocks - not necessarily in the same industry as Wabtec Corporation (NYSE:WAB) but similarly valued. These stocks are Live Nation Entertainment, Inc. (NYSE:LYV), Pembina Pipeline Corp (NYSE:PBA), Cheniere Energy, Inc. (NYSE:LNG), KeyCorp (NYSE:KEY), United Microelectronics Corp (NYSE:UMC), ONEOK, Inc. (NYSE:OKE), and Dr. Reddy's Laboratories Limited (NYSE:RDY). This group of stocks' market valuations are similar to WAB's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position LYV,50,1716514,6 PBA,12,56123,2 LNG,40,1971024,2 KEY,33,249262,-4 UMC,11,137076,0 OKE,20,239172,-5 RDY,13,208241,1 Average,25.6,653916,0.3 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 25.6 hedge funds with bullish positions and the average amount invested in these stocks was $654 million. That figure was $1732 million in WAB's case. Live Nation Entertainment, Inc. (NYSE:LYV) is the most popular stock in this table. On the other hand United Microelectronics Corp (NYSE:UMC) is the least popular one with only 11 bullish hedge fund positions. Wabtec Corporation (NYSE:WAB) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for WAB is 66.4. 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 33.3% in 2020 through December 18th and still beat the market by 16.4 percentage points. Hedge funds were also right about betting on WAB as the stock returned 18.9% since the end of Q3 (through 12/18) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
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Disclosure: None. This article was originally published at Insider Monkey.