It is already common knowledge that individual investors do not usually have the necessary resources and abilities to properly research an investment opportunity. As a result, most investors pick their illusory “winners” by making a superficial analysis and research that leads to poor performance on aggregate. Since stock returns aren’t usually symmetrically distributed and index returns are more affected by a few outlier stocks (i.e. the FAANG stocks dominating and driving S&P 500 Index’s returns in recent years), more than 50% of the constituents of the Standard and Poor’s 500 Index underperform the benchmark. Hence, if you randomly pick a stock, there is more than 50% chance that you’d fail to beat the market. At the same time, the 20 most favored S&P 500 stocks by the hedge funds monitored by Insider Monkey generated an outperformance of more than 10 percentage points in 2019. Of course, hedge funds do make wrong bets on some occasions and these get disproportionately publicized on financial media, but piggybacking their moves can beat the broader market on average. That’s why we are going to go over recent hedge fund activity in Amkor Technology, Inc. (NASDAQ:AMKR).
Is Amkor Technology, Inc. (NASDAQ:AMKR) a bargain? The smart money is betting on the stock. The number of bullish hedge fund bets moved up by 6 lately. Our calculations also showed that AMKR isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video at the end of this article for Q2 rankings).
Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. 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 Russell 2000 ETFs by 40 percentage points since May 2014 (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.
Bruce Kovner of Caxton Associates LP
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. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. This December, we recommended Adams Energy as a one-way bet based on an under-the-radar fund manager’s investor letter and the stock is still extremely cheap despite already gaining 20 percent. With all of this in mind we’re going to go over the latest hedge fund action encompassing Amkor Technology, Inc. (NASDAQ:AMKR).
What does smart money think about Amkor Technology, Inc. (NASDAQ:AMKR)?
Heading into the fourth quarter of 2019, a total of 25 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 32% from one quarter earlier. On the other hand, there were a total of 18 hedge funds with a bullish position in AMKR a year ago. With hedge funds’ positions undergoing their usual ebb and flow, there exists a few noteworthy hedge fund managers who were upping their stakes considerably (or already accumulated large positions).
More specifically, Renaissance Technologies was the largest shareholder of Amkor Technology, Inc. (NASDAQ:AMKR), with a stake worth $21.5 million reported as of the end of September. Trailing Renaissance Technologies was D E Shaw, which amassed a stake valued at $21.2 million. Arrowstreet Capital, AQR Capital Management, and Royce & Associates 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 Zebra Capital Management allocated the biggest weight to Amkor Technology, Inc. (NASDAQ:AMKR), around 0.69% of its 13F portfolio. Weld Capital Management is also relatively very bullish on the stock, setting aside 0.38 percent of its 13F equity portfolio to AMKR.
As aggregate interest increased, key hedge funds have jumped into Amkor Technology, Inc. (NASDAQ:AMKR) headfirst. Marshall Wace, managed by Paul Marshall and Ian Wace, established the largest position in Amkor Technology, Inc. (NASDAQ:AMKR). Marshall Wace had $4.9 million invested in the company at the end of the quarter. Minhua Zhang’s Weld Capital Management also initiated a $2.1 million position during the quarter. The other funds with new positions in the stock are David Harding’s Winton Capital Management, Donald Sussman’s Paloma Partners, and Bruce Kovner’s Caxton Associates.
Let’s now take a look at hedge fund activity in other stocks similar to Amkor Technology, Inc. (NASDAQ:AMKR). These stocks are Biohaven Pharmaceutical Holding Company Ltd. (NYSE:BHVN), PQ Group Holdings Inc. (NYSE:PQG), PriceSmart, Inc. (NASDAQ:PSMT), and Northwest Natural Holding Company (NYSE:NWN). This group of stocks’ market caps resemble AMKR’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| BHVN | 34 | 455638 | -4 |
| PQG | 7 | 55742 | 1 |
| PSMT | 9 | 50814 | -6 |
| NWN | 16 | 63875 | 4 |
| Average | 16.5 | 156517 | -1.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 16.5 hedge funds with bullish positions and the average amount invested in these stocks was $157 million. That figure was $116 million in AMKR’s case. Biohaven Pharmaceutical Holding Company Ltd. (NYSE:BHVN) is the most popular stock in this table. On the other hand PQ Group Holdings Inc. (NYSE:PQG) is the least popular one with only 7 bullish hedge fund positions. Amkor Technology, Inc. (NASDAQ:AMKR) is not the most popular stock in this group but hedge fund interest is still above average. 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 10.1 percentage points. Hedge funds were also right about betting on AMKR as the stock returned 98.2% in 2019 and outperformed the market. Hedge funds were rewarded for their relative bullishness.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.
