Amid an overall bull market, many stocks that smart money investors were collectively bullish on surged through the end of November. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained 54% and 51% respectively. Our research shows that most of the stocks that smart money likes historically generate strong risk-adjusted returns. That’s why we weren’t surprised when hedge funds’ top 20 large-cap stock picks generated a return of 37.6% in 2019 (through the end of November) and outperformed the broader market benchmark by 9.9 percentage points.This is why following the smart money sentiment is a useful tool at identifying the next stock to invest in.
Is American Superconductor Corporation (NASDAQ:AMSC) a bargain? Investors who are in the know are taking a bullish view. The number of long hedge fund positions inched up by 1 in recent months. Our calculations also showed that AMSC isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings). AMSC was in 12 hedge funds’ portfolios at the end of September. There were 11 hedge funds in our database with AMSC positions at the end of the previous quarter.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Today there are a large number of metrics investors employ to size up their holdings. Two of the best metrics are hedge fund and insider trading moves. We have shown that, historically, those who follow the top picks of the elite fund managers can outpace the S&P 500 by a significant amount (see the details here).
Cliff Asness of AQR Capital Management
We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world’s largest cannabis market, so we check out this European marijuana stock pitch. One of the most bullish analysts in America just put his money where his mouth is. He says, “I’m investing more today than I did back in early 2009.” So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We also rely on the best performing hedge funds‘ buy/sell signals. Let’s analyze the fresh hedge fund action encompassing American Superconductor Corporation (NASDAQ:AMSC).
What have hedge funds been doing with American Superconductor Corporation (NASDAQ:AMSC)?
Heading into the fourth quarter of 2019, a total of 12 of the hedge funds tracked by Insider Monkey were long this stock, a change of 9% from one quarter earlier. On the other hand, there were a total of 10 hedge funds with a bullish position in AMSC a year ago. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Renaissance Technologies held the most valuable stake in American Superconductor Corporation (NASDAQ:AMSC), which was worth $9.8 million at the end of the third quarter. On the second spot was Royce & Associates which amassed $4.9 million worth of shares. GMT Capital, D E Shaw, and AQR Capital Management 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 GMT Capital allocated the biggest weight to American Superconductor Corporation (NASDAQ:AMSC), around 0.15% of its 13F portfolio. Concourse Capital Management is also relatively very bullish on the stock, earmarking 0.09 percent of its 13F equity portfolio to AMSC.
As industrywide interest jumped, some big names have jumped into American Superconductor Corporation (NASDAQ:AMSC) headfirst. AQR Capital Management, managed by Cliff Asness, established the biggest position in American Superconductor Corporation (NASDAQ:AMSC). AQR Capital Management had $3 million invested in the company at the end of the quarter. Matthew Hulsizer’s PEAK6 Capital Management also initiated a $0 million position during the quarter. The only other fund with a brand new AMSC position is Matthew Hulsizer’s PEAK6 Capital Management.
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as American Superconductor Corporation (NASDAQ:AMSC) but similarly valued. These stocks are Riverview Bancorp, Inc. (NASDAQ:RVSB), Pieris Pharmaceuticals, Inc. (NASDAQ:PIRS), Hill International Inc (NYSE:HIL), and SandRidge Energy Inc. (NYSE:SD). All of these stocks’ market caps match AMSC’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| RVSB | 10 | 6350 | 2 |
| PIRS | 11 | 38716 | -1 |
| HIL | 12 | 49032 | 2 |
| SD | 18 | 53114 | 0 |
| Average | 12.75 | 36803 | 0.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 12.75 hedge funds with bullish positions and the average amount invested in these stocks was $37 million. That figure was $27 million in AMSC’s case. SandRidge Energy Inc. (NYSE:SD) is the most popular stock in this table. On the other hand Riverview Bancorp, Inc. (NASDAQ:RVSB) is the least popular one with only 10 bullish hedge fund positions. American Superconductor Corporation (NASDAQ:AMSC) is not the least popular stock in this group but hedge fund interest is still below average. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. A small number of hedge funds were also right about betting on AMSC, though not to the same extent, as the stock returned 6.5% during the first two months of the fourth quarter and outperformed the market.
Disclosure: None. This article was originally published at Insider Monkey.
