Amid an overall bull market, many stocks that smart money investors were collectively bullish on surged through the end of November. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained 54% and 51% respectively. Our research shows that most of the stocks that smart money likes historically generate strong risk-adjusted returns. That’s why we weren’t surprised when hedge funds’ top 20 large-cap stock picks generated a return of 37.4% through the end of November and outperformed the broader market benchmark by 9.9 percentage points.This is why following the smart money sentiment is a useful tool at identifying the next stock to invest in.
Is Ameresco Inc (NYSE:AMRC) ready to rally soon? Money managers are in an optimistic mood. The number of bullish hedge fund bets increased by 1 in recent months. Our calculations also showed that AMRC isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings).
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
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’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the Russell 2000 ETFs by 40 percentage points since May 2014 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 27.8% through November 21, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
John Overdeck of Two Sigma Advisors
We leave no stone unturned when looking for the next great investment idea. For example Discover is offering this insane cashback card, so we look into shorting the stock. One of the most bullish analysts in America just put his money where his mouth is. He says, “I’m investing more today than I did back in early 2009.” So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We even check out this option genius’ weekly trade ideas. This December, we recommended Adams Energy as a one-way bet based on an under-the-radar fund manager’s investor letter and the stock already gained 20 percent. Now we’re going to take a glance at the latest hedge fund action encompassing Ameresco Inc (NYSE:AMRC).
What have hedge funds been doing with Ameresco Inc (NYSE:AMRC)?
At Q3’s end, a total of 6 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 20% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards AMRC over the last 17 quarters. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Royce & Associates held the most valuable stake in Ameresco Inc (NYSE:AMRC), which was worth $21.1 million at the end of the third quarter. On the second spot was Bandera Partners which amassed $10.5 million worth of shares. Two Sigma Advisors, AQR Capital Management, and PDT Partners 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 Bandera Partners allocated the biggest weight to Ameresco Inc (NYSE:AMRC), around 6.61% of its 13F portfolio. Royce & Associates is also relatively very bullish on the stock, setting aside 0.2 percent of its 13F equity portfolio to AMRC.
Consequently, some big names have jumped into Ameresco Inc (NYSE:AMRC) headfirst. Winton Capital Management, managed by David Harding, created the biggest position in Ameresco Inc (NYSE:AMRC). Winton Capital Management had $0.2 million invested in the company at the end of the quarter.
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Ameresco Inc (NYSE:AMRC) but similarly valued. These stocks are Rhythm Pharmaceuticals, Inc. (NASDAQ:RYTM), Garrett Motion Inc. (NYSE:GTX), ChipMOS Technologies Inc. (NASDAQ:IMOS), and Bryn Mawr Bank Corp. (NASDAQ:BMTC). This group of stocks’ market values are similar to AMRC’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| RYTM | 8 | 200857 | -2 |
| GTX | 27 | 207710 | 4 |
| IMOS | 3 | 33579 | 1 |
| BMTC | 9 | 36594 | 0 |
| Average | 11.75 | 119685 | 0.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 11.75 hedge funds with bullish positions and the average amount invested in these stocks was $120 million. That figure was $33 million in AMRC’s case. Garrett Motion Inc. (NYSE:GTX) is the most popular stock in this table. On the other hand ChipMOS Technologies Inc. (NASDAQ:IMOS) is the least popular one with only 3 bullish hedge fund positions. Ameresco Inc (NYSE:AMRC) 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. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately AMRC wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); AMRC investors were disappointed as the stock returned 1.7% during the first two months of the fourth quarter 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 70 percent of these stocks already outperformed the market in Q4.
Disclosure: None. This article was originally published at Insider Monkey.
