Where Do Hedge Funds Stand On Waters Corporation (WAT)?

·5 min read

While the market driven by short-term sentiment influenced by the accommodative interest rate environment in the US, virus news and stimulus spending, many smart money investors are starting to get cautious towards the current bull run since March, 2020 and hedging or reducing many of their long positions. Some fund managers are betting on Dow hitting 40,000 to generate strong returns. However, as we know, big investors usually buy stocks with strong fundamentals that can deliver gains both in bull and bear markets, which is why we believe we can profit from imitating them. In this article, we are going to take a look at the smart money sentiment surrounding Waters Corporation (NYSE:WAT).

Hedge fund interest in Waters Corporation (NYSE:WAT) shares was flat at the end of last quarter. This is usually a negative indicator. Our calculations also showed that WAT isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings). At the end of this article we will also compare WAT to other stocks including PerkinElmer, Inc. (NYSE:PKI), International Paper Company (NYSE:IP), and Kellogg Company (NYSE:K) to get a better sense of its popularity.

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium prices have more than doubled over the past year, so we go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. Keeping this in mind let's take a look at the recent hedge fund action regarding Waters Corporation (NYSE:WAT).

AQR CAPITAL MANAGEMENT
AQR CAPITAL MANAGEMENT

Cliff Asness of AQR Capital Management

Do Hedge Funds Think WAT Is A Good Stock To Buy Now?

At third quarter's end, a total of 40 of the hedge funds tracked by Insider Monkey were long this stock, a change of 0% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in WAT over the last 25 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.

More specifically, Fundsmith LLP was the largest shareholder of Waters Corporation (NYSE:WAT), with a stake worth $1611.9 million reported as of the end of September. Trailing Fundsmith LLP was Arrowstreet Capital, which amassed a stake valued at $331.9 million. Impax Asset Management, AQR Capital Management, and D E Shaw 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 Fundsmith LLP allocated the biggest weight to Waters Corporation (NYSE:WAT), around 4.46% of its 13F portfolio. Partner Fund Management is also relatively very bullish on the stock, setting aside 1.24 percent of its 13F equity portfolio to WAT.

Seeing as Waters Corporation (NYSE:WAT) has faced bearish sentiment from hedge fund managers, it's safe to say that there lies a certain "tier" of funds that slashed their full holdings heading into Q4. At the top of the heap, Kevin Molloy's Iron Triangle Partners sold off the biggest investment of the "upper crust" of funds watched by Insider Monkey, totaling close to $58.8 million in stock. Michael Rockefeller and KarláKroeker's fund, Woodline Partners, also cut its stock, about $16.1 million worth. These transactions are intriguing to say the least, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).

Let's now take a look at hedge fund activity in other stocks similar to Waters Corporation (NYSE:WAT). These stocks are PerkinElmer, Inc. (NYSE:PKI), International Paper Company (NYSE:IP), Kellogg Company (NYSE:K), KE Holdings Inc (NYSE:BEKE), Ventas, Inc. (NYSE:VTR), McCormick & Company, Incorporated (NYSE:MKC), and DTE Energy Company (NYSE:DTE). This group of stocks' market valuations are similar to WAT's market valuation.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position PKI,31,1920736,-1 IP,30,263108,-1 K,22,290019,-10 BEKE,26,1740683,-5 VTR,23,464641,-2 MKC,35,1782097,1 DTE,22,426119,-10 Average,27,983915,-4 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 27 hedge funds with bullish positions and the average amount invested in these stocks was $984 million. That figure was $2673 million in WAT's case. McCormick & Company, Incorporated (NYSE:MKC) is the most popular stock in this table. On the other hand Kellogg Company (NYSE:K) is the least popular one with only 22 bullish hedge fund positions. Compared to these stocks Waters Corporation (NYSE:WAT) is more popular among hedge funds. Our overall hedge fund sentiment score for WAT is 85. 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 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 28.6% in 2021 through November 30th and still beat the market by 5.6 percentage points. Unfortunately WAT wasn't nearly as popular as these 5 stocks and hedge funds that were betting on WAT were disappointed as the stock returned -8.2% since the end of the third quarter (through 11/30) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as most of these stocks already outperformed the market since 2019.

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

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