Did The Smart Money Play Advanced Micro Devices, Inc. (AMD) Correctly?

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 Advanced Micro Devices, Inc. (NASDAQ:AMD) and determine whether hedge funds had an edge regarding this stock.

Advanced Micro Devices, Inc. (NASDAQ:AMD) was in 65 hedge funds’ portfolios at the end of September. The all time high for this statistic is 74. AMD investors should pay attention to an increase in support from the world’s most elite money managers of late. There were 63 hedge funds in our database with AMD holdings at the end of June. Our calculations also showed that AMD isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings).

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. Now let’s go over the recent hedge fund action regarding Advanced Micro Devices, Inc. (NASDAQ:AMD).

Michael Gelband of ExodusPoint Capital

Do Hedge Funds Think AMD Is A Good Stock To Buy Now?

At the end of the third quarter, a total of 65 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 3% from the previous quarter. By comparison, 71 hedge funds held shares or bullish call options in AMD a year ago. With the smart money’s sentiment swirling, there exists a select group of notable hedge fund managers who were increasing their holdings substantially (or already accumulated large positions).

Among these funds, Fisher Asset Management held the most valuable stake in Advanced Micro Devices, Inc. (NASDAQ:AMD), which was worth $1623.7 million at the end of the third quarter. On the second spot was Citadel Investment Group which amassed $1328.5 million worth of shares. Renaissance Technologies, Sylebra Capital Management, and D E Shaw 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 Sylebra Capital Management allocated the biggest weight to Advanced Micro Devices, Inc. (NASDAQ:AMD), around 11.33% of its 13F portfolio. Taconic Capital is also relatively very bullish on the stock, designating 10.91 percent of its 13F equity portfolio to AMD.

Now, key hedge funds were breaking ground themselves. Alkeon Capital Management, managed by Panayotis Takis Sparaggis, assembled the largest call position in Advanced Micro Devices, Inc. (NASDAQ:AMD). Alkeon Capital Management had $158.5 million invested in the company at the end of the quarter. Michel Massoud’s Melqart Asset Management also made a $67.9 million investment in the stock during the quarter. The following funds were also among the new AMD investors: John Hurley’s Cavalry Asset Management, Michael Gelband’s ExodusPoint Capital, and Simon Sadler’s Segantii Capital.

Let’s now take a look at hedge fund activity in other stocks similar to Advanced Micro Devices, Inc. (NASDAQ:AMD). We will take a look at International Business Machines Corp. (NYSE:IBM), ServiceNow Inc (NYSE:NOW), Sanofi (NASDAQ:SNY), American Tower Corporation (NYSE:AMT), Amgen, Inc. (NASDAQ:AMGN), The Toronto-Dominion Bank (NYSE:TD), and Intuitive Surgical, Inc. (NASDAQ:ISRG). This group of stocks’ market values are closest to AMD’s market value.

View table here if you experience formatting issues.

As you can see these stocks had an average of 48.3 hedge funds with bullish positions and the average amount invested in these stocks was $2853 million. That figure was $5254 million in AMD’s case. ServiceNow Inc (NYSE:NOW) is the most popular stock in this table. On the other hand The Toronto-Dominion Bank (NYSE:TD) is the least popular one with only 17 bullish hedge fund positions. Advanced Micro Devices, Inc. (NASDAQ:AMD) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for AMD is 67.6. 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 gained 29.6% in 2021 and still beat the market by 3.6 percentage points. Hedge funds were also right about betting on AMD as the stock returned 11% since the end of Q3 (through 1/31) and outperformed the market. Hedge funds were rewarded for their relative bullishness.

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