How do you pick the next stock to invest in? One way would be to spend days of research browsing through thousands of publicly traded companies. However, an easier way is to look at the stocks that smart money investors are collectively bullish on. Hedge funds and other institutional investors usually invest large amounts of capital and have to conduct due diligence while choosing their next pick. They don’t always get it right, but, on average, their stock picks historically generated strong returns after adjusting for known risk factors. With this in mind, let’s take a look at the recent hedge fund activity surrounding AMC Networks Inc (NASDAQ:AMCX) and determine whether hedge funds had an edge regarding this stock.
AMC Networks Inc (NASDAQ:AMCX) was in 23 hedge funds’ portfolios at the end of the first quarter of 2020. AMCX investors should pay attention to a decrease in enthusiasm from smart money lately. There were 25 hedge funds in our database with AMCX positions at the end of the previous quarter. Our calculations also showed that AMCX 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.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 58 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’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 36% through May 18th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Leon Cooperman of Omega Advisors
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, on one site we found out that NBA champion Isiah Thomas is now the CEO of this cannabis company. The same site also talks about a snack manufacturer that’s growing at 30% annually. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Hedge fund sentiment towards Tesla reached its all time high at the end of 2019 and Tesla shares more than tripled this year. We are trying to identify other EV revolution winners, so if you have any good ideas send us an email. Now we’re going to view the fresh hedge fund action encompassing AMC Networks Inc (NASDAQ:AMCX).
What have hedge funds been doing with AMC Networks Inc (NASDAQ:AMCX)?
Heading into the second quarter of 2020, a total of 23 of the hedge funds tracked by Insider Monkey were long this stock, a change of -8% from the fourth quarter of 2019. The graph below displays the number of hedge funds with bullish position in AMCX over the last 18 quarters. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, AQR Capital Management was the largest shareholder of AMC Networks Inc (NASDAQ:AMCX), with a stake worth $56.2 million reported as of the end of September. Trailing AQR Capital Management was GAMCO Investors, which amassed a stake valued at $20.4 million. Omega Advisors, Horizon Asset Management, and Millennium 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 Omega Advisors allocated the biggest weight to AMC Networks Inc (NASDAQ:AMCX), around 1.8% of its 13F portfolio. AlphaOne Capital Partners is also relatively very bullish on the stock, designating 0.52 percent of its 13F equity portfolio to AMCX.
Because AMC Networks Inc (NASDAQ:AMCX) has experienced bearish sentiment from hedge fund managers, we can see that there was a specific group of hedgies that slashed their full holdings heading into Q4. At the top of the heap, Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital cut the biggest position of all the hedgies watched by Insider Monkey, worth close to $9.2 million in stock. Ian Simm’s fund, Impax Asset Management, also sold off its stock, about $4 million worth. These transactions are interesting, as total hedge fund interest dropped by 2 funds heading into Q4.
Let’s go over hedge fund activity in other stocks similar to AMC Networks Inc (NASDAQ:AMCX). We will take a look at Mueller Industries, Inc. (NYSE:MLI), Corcept Therapeutics Incorporated (NASDAQ:CORT), Hilton Grand Vacations Inc. (NYSE:HGV), and Glaukos Corporation (NYSE:GKOS). This group of stocks’ market caps are similar to AMCX’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| MLI | 17 | 160955 | -4 |
| CORT | 21 | 160165 | 0 |
| HGV | 29 | 512572 | -17 |
| GKOS | 15 | 83596 | -1 |
| Average | 20.5 | 229322 | -5.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 20.5 hedge funds with bullish positions and the average amount invested in these stocks was $229 million. That figure was $113 million in AMCX’s case. Hilton Grand Vacations Inc. (NYSE:HGV) is the most popular stock in this table. On the other hand Glaukos Corporation (NYSE:GKOS) is the least popular one with only 15 bullish hedge fund positions. AMC Networks Inc (NASDAQ:AMCX) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. 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 12.3% in 2020 through June 30th but beat the market by 15.5 percentage points. Unfortunately AMCX wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on AMCX were disappointed as the stock returned -3.8% during the same time period and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.
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Disclosure: None. This article was originally published at Insider Monkey.
