We know that hedge funds generate strong, risk-adjusted returns over the long run, which is why imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, professional investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn’t mean that they don’t have occasional colossal losses; they do. However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, let’s examine the smart money sentiment towards Applied Materials, Inc. (NASDAQ:AMAT) and determine whether hedge funds skillfully traded this stock.
Applied Materials, Inc. (NASDAQ:AMAT) was in 68 hedge funds’ portfolios at the end of the third quarter of 2021. The all time high for this statistic is 78. AMAT shareholders have witnessed a decrease in support from the world’s most elite money managers in recent months. There were 73 hedge funds in our database with AMAT holdings at the end of June. Our calculations also showed that AMAT isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings).
William Von Mueffling of Cantillon Capital Management
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 we’re going to check out the fresh hedge fund action encompassing Applied Materials, Inc. (NASDAQ:AMAT).
Do Hedge Funds Think AMAT Is A Good Stock To Buy Now?
At the end of September, a total of 68 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -7% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards AMAT over the last 25 quarters. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Applied Materials, Inc. (NASDAQ:AMAT) was held by Generation Investment Management, which reported holding $563 million worth of stock at the end of September. It was followed by Cantillon Capital Management with a $472.3 million position. Other investors bullish on the company included Fisher Asset Management, Matrix Capital Management, and Citadel Investment Group. In terms of the portfolio weights assigned to each position Glaxis Capital Management allocated the biggest weight to Applied Materials, Inc. (NASDAQ:AMAT), around 22.69% of its 13F portfolio. Noked Capital is also relatively very bullish on the stock, earmarking 10.7 percent of its 13F equity portfolio to AMAT.
Due to the fact that Applied Materials, Inc. (NASDAQ:AMAT) has experienced declining sentiment from the aggregate hedge fund industry, it’s safe to say that there was a specific group of fund managers who sold off their positions entirely in the third quarter. Interestingly, Zach Schreiber’s Point State Capital dropped the largest stake of all the hedgies monitored by Insider Monkey, comprising close to $120.2 million in stock, and James Crichton’s Hitchwood Capital Management was right behind this move, as the fund dropped about $64.1 million worth. These bearish behaviors are intriguing to say the least, as aggregate hedge fund interest was cut by 5 funds in the third quarter.
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Applied Materials, Inc. (NASDAQ:AMAT) but similarly valued. We will take a look at Pinduoduo Inc. (NASDAQ:PDD), General Electric Company (NYSE:GE), Diageo plc (NYSE:DEO), JD.Com Inc (NASDAQ:JD), CVS Health Corporation (NYSE:CVS), Target Corporation (NYSE:TGT), and Anheuser-Busch InBev SA/NV (NYSE:BUD). This group of stocks’ market values resemble AMAT’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| PDD | 49 | 3538156 | 0 |
| GE | 53 | 6244560 | -14 |
| DEO | 18 | 703948 | -2 |
| JD | 66 | 9057155 | -10 |
| CVS | 61 | 1060624 | -6 |
| TGT | 49 | 4349899 | -17 |
| BUD | 11 | 826303 | -7 |
| Average | 43.9 | 3682949 | -8 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 43.9 hedge funds with bullish positions and the average amount invested in these stocks was $3683 million. That figure was $4320 million in AMAT’s case. JD.Com Inc (NASDAQ:JD) is the most popular stock in this table. On the other hand Anheuser-Busch InBev SA/NV (NYSE:BUD) is the least popular one with only 11 bullish hedge fund positions. Compared to these stocks Applied Materials, Inc. (NASDAQ:AMAT) is more popular among hedge funds. Our overall hedge fund sentiment score for AMAT is 76.2. 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 returned 29.6% in 2021 and managed to beat the market by another 3.6 percentage points. Hedge funds were also right about betting on AMAT as the stock returned 7.5% since the end of September (through 1/31) and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.
Follow Applied Materials Inc (NASDAQ:AMAT)
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Disclosure: None. This article was originally published at Insider Monkey.
