Agilent Technologies Inc. (A): Are Hedge Funds Right About This Stock?

In this article you are going to find out whether hedge funds think Agilent Technologies Inc. (NYSE:A) is a good investment right now. We like to check what the smart money thinks first before doing extensive research on a given stock. Although there have been several high profile failed hedge fund picks, the consensus picks among hedge fund investors have historically outperformed the market after adjusting for known risk attributes. It’s not surprising given that hedge funds have access to better information and more resources to predict the winners in the stock market.

Agilent Technologies Inc. (NYSE:A) was in 35 hedge funds’ portfolios at the end of March. A investors should pay attention to a decrease in hedge fund interest in recent months. There were 46 hedge funds in our database with A positions at the end of the previous quarter. Our calculations also showed that A isn’t among the 30 most popular stocks among hedge funds (click for Q1 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.

So, why do we pay attention to hedge fund sentiment before making any investment decisions? Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 51 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.

Bill Ackman of Pershing Square

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, 2020’s unprecedented market conditions provide us with the highest number of trading opportunities in a decade. So we are checking out trades like this one. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Now let’s view the latest hedge fund action encompassing Agilent Technologies Inc. (NYSE:A).

Hedge fund activity in Agilent Technologies Inc. (NYSE:A)

At Q1’s end, a total of 35 of the hedge funds tracked by Insider Monkey were long this stock, a change of -24% from the previous quarter. On the other hand, there were a total of 41 hedge funds with a bullish position in A a year ago. With the smart money’s positions undergoing their usual ebb and flow, there exists a select group of notable hedge fund managers who were adding to their stakes significantly (or already accumulated large positions).

Of the funds tracked by Insider Monkey, Pershing Square, managed by Bill Ackman, holds the largest position in Agilent Technologies Inc. (NYSE:A). Pershing Square has a $904.3 million position in the stock, comprising 13.8% of its 13F portfolio. Coming in second is D E Shaw, managed by D. E. Shaw, which holds a $350.3 million position; the fund has 0.5% of its 13F portfolio invested in the stock. Other peers with similar optimism consist of William von Mueffling’s Cantillon Capital Management, Ian Simm’s Impax Asset Management and Andreas Halvorsen’s Viking Global. In terms of the portfolio weights assigned to each position Clearfield Capital allocated the biggest weight to Agilent Technologies Inc. (NYSE:A), around 15.25% of its 13F portfolio. Pershing Square is also relatively very bullish on the stock, setting aside 13.76 percent of its 13F equity portfolio to A.

Judging by the fact that Agilent Technologies Inc. (NYSE:A) has faced falling interest from hedge fund managers, logic holds that there is a sect of hedge funds that slashed their full holdings last quarter. Interestingly, John Overdeck and David Siegel’s Two Sigma Advisors sold off the largest investment of the “upper crust” of funds watched by Insider Monkey, totaling about $56.7 million in stock. Seth Rosen’s fund, Nitorum Capital, also said goodbye to its stock, about $37.7 million worth. These moves are intriguing to say the least, as total hedge fund interest dropped by 11 funds last quarter.

Let’s now take a look at hedge fund activity in other stocks similar to Agilent Technologies Inc. (NYSE:A). We will take a look at Willis Towers Watson Public Limited Company (NASDAQ:WLTW), McKesson Corporation (NYSE:MCK), Sirius XM Holdings Inc (NASDAQ:SIRI), and Southern Copper Corporation (NYSE:SCCO). This group of stocks’ market valuations resemble A’s market valuation.

View table here if you experience formatting issues.

As you can see these stocks had an average of 40.25 hedge funds with bullish positions and the average amount invested in these stocks was $1249 million. That figure was $2668 million in A’s case. McKesson Corporation (NYSE:MCK) is the most popular stock in this table. On the other hand Southern Copper Corporation (NYSE:SCCO) is the least popular one with only 19 bullish hedge fund positions. Agilent Technologies Inc. (NYSE:A) is not the least popular stock in this group but hedge fund interest is still below average. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 8.3% in 2020 through the end of May and still beat the market by 13.2 percentage points. A small number of hedge funds were also right about betting on A as the stock returned 23.1% during the second quarter and outperformed the market by an even larger margin.

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