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 Antero Midstream Corp (NYSE:AM).
Antero Midstream Corp (NYSE:AM) shareholders have witnessed a decrease in support from the world’s most elite money managers of late. Antero Midstream Corp (NYSE:AM) was in 17 hedge funds’ portfolios at the end of the first quarter of 2021. The all time high for this statistic is 19. There were 19 hedge funds in our database with AM holdings at the end of December. Our calculations also showed that AM isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings).
In the eyes of most market participants, hedge funds are assumed to be unimportant, outdated investment tools of the past. While there are over 8000 funds with their doors open today, Our researchers hone in on the elite of this group, about 850 funds. These hedge fund managers orchestrate bulk of all hedge funds’ total capital, and by observing their best equity investments, Insider Monkey has discovered many investment strategies that have historically outpaced the S&P 500 index. Insider Monkey’s flagship short hedge fund strategy outstripped the S&P 500 short ETFs by around 20 percentage points annually since its inception in March 2017. Also, our monthly newsletter’s portfolio of long stock picks returned 206.8% since March 2017 (through May 2021) and beat the S&P 500 Index by more than 115 percentage points. You can download a sample issue of this newsletter on our website .
Michael Gelband of ExodusPoint Capital
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, pet market is growing at a 7% annual rate and is expected to reach $110 billion in 2021. So, we are checking out the 5 best stocks for animal lovers. We go through lists like the 15 best Jim Cramer stocks to identify the next Tesla that will deliver outsized returns. 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. You can subscribe to our free daily newsletter on our homepage. Keeping this in mind let’s take a glance at the fresh hedge fund action encompassing Antero Midstream Corp (NYSE:AM).
Do Hedge Funds Think AM Is A Good Stock To Buy Now?
Heading into the second quarter of 2021, a total of 17 of the hedge funds tracked by Insider Monkey were long this stock, a change of -11% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in AM over the last 23 quarters. With the smart money’s sentiment swirling, there exists a select group of key hedge fund managers who were boosting their stakes meaningfully (or already accumulated large positions).
More specifically, Brave Warrior Capital was the largest shareholder of Antero Midstream Corp (NYSE:AM), with a stake worth $31.4 million reported as of the end of March. Trailing Brave Warrior Capital was Arrowstreet Capital, which amassed a stake valued at $22.6 million. Shah Capital Management, Mountain Lake Investment Management, and Brightline Capital 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 Brightline Capital allocated the biggest weight to Antero Midstream Corp (NYSE:AM), around 7.92% of its 13F portfolio. Mountain Lake Investment Management is also relatively very bullish on the stock, earmarking 6.62 percent of its 13F equity portfolio to AM.
Because Antero Midstream Corp (NYSE:AM) has witnessed falling interest from hedge fund managers, it’s easy to see that there lies a certain “tier” of money managers that decided to sell off their full holdings last quarter. Interestingly, Robert Henry Lynch’s Aristeia Capital dumped the largest position of all the hedgies monitored by Insider Monkey, valued at an estimated $16.5 million in stock, and Richard SchimeláandáLawrence Sapanski’s Cinctive Capital Management was right behind this move, as the fund dropped about $2.7 million worth. These bearish behaviors are intriguing to say the least, as aggregate hedge fund interest fell by 2 funds last quarter.
Let’s also examine hedge fund activity in other stocks similar to Antero Midstream Corp (NYSE:AM). These stocks are Armstrong World Industries, Inc. (NYSE:AWI), Healthcare Realty Trust Inc (NYSE:HR), Olink Holding AB (publ) (NASDAQ:OLK), Seaboard Corporation (NYSE:SEB), Alarm.com Holdings Inc (NASDAQ:ALRM), Agree Realty Corporation (NYSE:ADC), and KB Home (NYSE:KBH). This group of stocks’ market valuations match AM’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| AWI | 25 | 511972 | -6 |
| HR | 20 | 172535 | -3 |
| OLK | 20 | 174006 | 20 |
| SEB | 14 | 125291 | 1 |
| ALRM | 20 | 315314 | 0 |
| ADC | 18 | 200418 | 2 |
| KBH | 24 | 359374 | -4 |
| Average | 20.1 | 265559 | 1.4 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 20.1 hedge funds with bullish positions and the average amount invested in these stocks was $266 million. That figure was $123 million in AM’s case. Armstrong World Industries, Inc. (NYSE:AWI) is the most popular stock in this table. On the other hand Seaboard Corporation (NYSE:SEB) is the least popular one with only 14 bullish hedge fund positions. Antero Midstream Corp (NYSE:AM) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for AM is 43.5. 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 28.5% in 2021 through July 23rd and beat the market by 10.1 percentage points. A small number of hedge funds were also right about betting on AM, though not to the same extent, as the stock returned 13.3% since the end of Q1 (through July 23rd) and outperformed the market.
Follow Antero Midstream Corp (NYSE:AM)
Follow Antero Midstream Corp (NYSE:AM)
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Disclosure: None. This article was originally published at Insider Monkey.
