Looking for stocks with high upside potential? Just follow the big players within the hedge fund industry. Why should you do so? Let’s take a brief look at what statistics have to say about hedge funds’ stock picking abilities to illustrate. The Standard and Poor’s 500 Index returned approximately 5.7% in the 12 months ending October 26 (including dividend payments). Conversely, hedge funds’ 30 preferred S&P 500 stocks (as of June 2014) generated a return of 15.1% during the same 12-month period, with 53% of these stock picks outperforming the broader market benchmark. Coincidence? It might happen to be so, but it is unlikely. Our research covering the last 18 years indicates that hedge funds’ stock picks generate superior risk-adjusted returns. That’s why we believe it is wise to check hedge fund activity before you invest your time or your savings on a stock like Advanced Micro Devices, Inc. (NYSE:AMD).
Advanced Micro Devices, Inc. (NYSE:AMD) investors should be aware of an increase in support from the world’s most elite money managers in recent months. Our calculations also showed that amd isn’t among the 30 most popular stocks among hedge funds.
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s flagship best performing hedge funds strategy returned 6.3% year to date (through December 3rd) and outperformed the market even though it draws its stock picks among small-cap stocks. This strategy also outperformed the market by 18 percentage points since its inception (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
We’re going to take a look at the recent hedge fund action surrounding Advanced Micro Devices, Inc. (NYSE:AMD).
What have hedge funds been doing with Advanced Micro Devices, Inc. (NYSE:AMD)?
Heading into the fourth quarter of 2018, a total of 28 of the hedge funds tracked by Insider Monkey were long this stock, a change of 4% from the second quarter of 2018. On the other hand, there were a total of 30 hedge funds with a bullish position in AMD at the beginning of this year. With the smart money’s sentiment swirling, there exists an “upper tier” of notable hedge fund managers who were upping their stakes substantially (or already accumulated large positions).
More specifically, Citadel Investment Group was the largest shareholder of Advanced Micro Devices, Inc. (NYSE:AMD), with a stake worth $384.5 million reported as of the end of September. Trailing Citadel Investment Group was PEAK6 Capital Management, which amassed a stake valued at $187.7 million. D E Shaw, Discovery Capital Management, and D E Shaw were also very fond of the stock, giving the stock large weights in their portfolios.
As aggregate interest increased, key hedge funds were breaking ground themselves. Citadel Investment Group, managed by Ken Griffin, assembled the largest position in Advanced Micro Devices, Inc. (NYSE:AMD). Citadel Investment Group had $77.2 million invested in the company at the end of the quarter. John Thiessen’s Vertex One Asset Management also made a $19.1 million investment in the stock during the quarter. The other funds with brand new AMD positions are John Hurley’s Cavalry Asset Management, James Crichton’s Hitchwood Capital Management, and Principal Global Investors’s Columbus Circle Investors.
Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Advanced Micro Devices, Inc. (NYSE:AMD) but similarly valued. These stocks are TD Ameritrade Holding Corp. (NYSE:AMTD), NetEase, Inc (NASDAQ:NTES), Centene Corp (NYSE:CNC), and Pioneer Natural Resources Company (NYSE:PXD). This group of stocks’ market values resemble AMD’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| AMTD | 18 | 575391 | -10 |
| NTES | 26 | 3081199 | 2 |
| CNC | 49 | 1980935 | 7 |
| PXD | 58 | 2265946 | 1 |
| Average | 37.75 | 1975868 | 0 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 37.75 hedge funds with bullish positions and the average amount invested in these stocks was $1.98 billion. That figure was $600 million in AMD’s case. Pioneer Natural Resources Company (NYSE:PXD) is the most popular stock in this table. On the other hand TD Ameritrade Holding Corp. (NYSE:AMTD) is the least popular one with only 18 bullish hedge fund positions. Advanced Micro Devices, Inc. (NYSE:AMD) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. In this regard PXD might be a better candidate to consider a long position.
Disclosure: None. This article was originally published at Insider Monkey.
