We hate to say this but, we told you so. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW and predicted a US recession when the S&P 500 Index was trading at the 3150 level. We also told you to short the market and buy long-term Treasury bonds. Our article also called for a total international travel ban. While we were warning you, President Trump minimized the threat and failed to act promptly. As a result of his inaction, we will now experience a deeper recession (see why hell is coming).
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. Keeping this in mind, let’s take a look at whether AMC Networks Inc (NASDAQ:AMCX) is a good investment right now. We like to analyze hedge fund sentiment before conducting days of in-depth research. We do so because hedge funds and other elite investors have numerous Ivy League graduates, expert network advisers, and supply chain tipsters working or consulting for them. There is not a shortage of news stories covering failed hedge fund investments and it is a fact that hedge funds’ picks don’t beat the market 100% of the time, but their consensus picks have historically done very well and have outperformed the market after adjusting for risk.
Is AMC Networks Inc (NASDAQ:AMCX) an attractive investment now? Prominent investors are getting more bullish. The number of bullish hedge fund bets improved by 1 recently. Our calculations also showed that AMCX isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of this article for Q3 rankings). AMCX was in 25 hedge funds’ portfolios at the end of the fourth quarter of 2019. There were 24 hedge funds in our database with AMCX holdings at the end of the previous quarter.
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 S&P 500 ETFs by 41 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 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.
Leon Cooperman of Omega Advisors
We leave no stone unturned when looking for the next great investment idea. For example, we believe electric vehicles and energy storage are set to become giant markets, and we want to take advantage of the declining lithium prices amid the COVID-19 pandemic. So we are checking out investment opportunities like this one. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind let’s take a look at the recent hedge fund action surrounding AMC Networks Inc (NASDAQ:AMCX).
What does smart money think about AMC Networks Inc (NASDAQ:AMCX)?
At Q4’s end, a total of 25 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 4% from one quarter earlier. On the other hand, there were a total of 19 hedge funds with a bullish position in AMCX a year ago. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
When looking at the institutional investors followed by Insider Monkey, AQR Capital Management, managed by Cliff Asness, holds the largest position in AMC Networks Inc (NASDAQ:AMCX). AQR Capital Management has a $112.7 million position in the stock, comprising 0.1% of its 13F portfolio. Coming in second is Mario Gabelli of GAMCO Investors, with a $33.1 million position; the fund has 0.3% of its 13F portfolio invested in the stock. Some other members of the smart money that are bullish comprise Noam Gottesman’s GLG Partners, Ken Griffin’s Citadel Investment Group and Leon Cooperman’s Omega Advisors. In terms of the portfolio weights assigned to each position Omega Advisors allocated the biggest weight to AMC Networks Inc (NASDAQ:AMCX), around 0.71% of its 13F portfolio. AlphaOne Capital Partners is also relatively very bullish on the stock, earmarking 0.58 percent of its 13F equity portfolio to AMCX.
As aggregate interest increased, key hedge funds were breaking ground themselves. Coatue Management, managed by Philippe Laffont, created the largest position in AMC Networks Inc (NASDAQ:AMCX). Coatue Management had $0.9 million invested in the company at the end of the quarter. Paul Tudor Jones’s Tudor Investment Corp also made a $0.8 million investment in the stock during the quarter. The other funds with new positions in the stock are Peter Muller’s PDT Partners, Gavin Saitowitz and Cisco J. del Valle’s Springbok Capital, and David Andre and Astro Teller’s Cerebellum Capital.
Let’s check out hedge fund activity in other stocks similar to AMC Networks Inc (NASDAQ:AMCX). We will take a look at Beacon Roofing Supply, Inc. (NASDAQ:BECN), Bed Bath & Beyond Inc. (NASDAQ:BBBY), Norbord Inc. (NYSE:OSB), and EVO Payments, Inc. (NASDAQ:EVOP). This group of stocks’ market caps are closest to AMCX’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| BECN | 22 | 346853 | -1 |
| BBBY | 34 | 484497 | 7 |
| OSB | 16 | 51708 | 9 |
| EVOP | 22 | 89278 | 7 |
| Average | 23.5 | 243084 | 5.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 23.5 hedge funds with bullish positions and the average amount invested in these stocks was $243 million. That figure was $232 million in AMCX’s case. Bed Bath & Beyond Inc. (NASDAQ:BBBY) is the most popular stock in this table. On the other hand Norbord Inc. (NYSE:OSB) is the least popular one with only 16 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 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. These stocks lost 13.0% in 2020 through April 6th but beat the market by 4.2 percentage points. Unfortunately AMCX wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on AMCX were disappointed as the stock returned -42.7% 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 20 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.
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.
