Hedge Funds Are Cashing Out Of AECOM (ACM)

In this article you are going to find out whether hedge funds think AECOM (NYSE:ACM) is a good investment right now. We like to check what the smart money thinks first before doing extensive research on a given stock. Although there have been several high profile failed hedge fund picks, the consensus picks among hedge fund investors have historically outperformed the market after adjusting for known risk attributes. It’s not surprising given that hedge funds have access to better information and more resources to predict the winners in the stock market.

AECOM (NYSE:ACM) was in 32 hedge funds’ portfolios at the end of the second quarter of 2021. The all time high for this statistic is 39. ACM investors should be aware of a decrease in hedge fund interest in recent months. There were 38 hedge funds in our database with ACM positions at the end of the first quarter. Our calculations also showed that ACM isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings).

So, why do we pay attention to hedge fund sentiment before making any investment decisions? 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 more than 79 percentage points since March 2017 (see the details here). We have been able to outperform the passive index funds by tracking the moves of corporate insiders and hedge funds, and we believe small investors can benefit a lot from reading hedge fund investor letters and 13F filings.

Jonathan Barrett of Luminus Management

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. 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. 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. Now we’re going to take a gander at the fresh hedge fund action regarding AECOM (NYSE:ACM).

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

At the end of the second quarter, a total of 32 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -16% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in ACM over the last 24 quarters. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Of the funds tracked by Insider Monkey, Jeffrey Smith’s Starboard Value LP has the number one position in AECOM (NYSE:ACM), worth close to $470.6 million, amounting to 9.2% of its total 13F portfolio. The second largest stake is held by Citadel Investment Group, managed by Ken Griffin, which holds a $86.9 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Some other hedge funds and institutional investors that hold long positions comprise D. E. Shaw’s D E Shaw, Renaissance Technologies and Jonathan Barrett and Paul Segal’s Luminus Management. In terms of the portfolio weights assigned to each position Starboard Value LP allocated the biggest weight to AECOM (NYSE:ACM), around 9.24% of its 13F portfolio. Luminus Management is also relatively very bullish on the stock, setting aside 3.97 percent of its 13F equity portfolio to ACM.

Due to the fact that AECOM (NYSE:ACM) has witnessed declining sentiment from the smart money, it’s safe to say that there exists a select few funds who were dropping their entire stakes in the second quarter. It’s worth mentioning that Jeffrey Altman’s Owl Creek Asset Management dropped the largest stake of the 750 funds tracked by Insider Monkey, comprising an estimated $55.9 million in stock. Benjamin Pass’s fund, TOMS Capital, also dropped its stock, about $43.7 million worth. These moves are intriguing to say the least, as total hedge fund interest was cut by 6 funds in the second quarter.

Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as AECOM (NYSE:ACM) but similarly valued. These stocks are AptarGroup, Inc. (NYSE:ATR), Pinnacle West Capital Corporation (NYSE:PNW), Dun & Bradstreet Holdings, Inc. (NYSE:DNB), Syneos Health, Inc. (NASDAQ:SYNH), Manhattan Associates, Inc. (NASDAQ:MANH), Neurocrine Biosciences, Inc. (NASDAQ:NBIX), and Albertsons Companies, Inc. (NYSE:ACI). This group of stocks’ market caps resemble ACM’s market cap.

View table here if you experience formatting issues.

As you can see these stocks had an average of 29 hedge funds with bullish positions and the average amount invested in these stocks was $891 million. That figure was $791 million in ACM’s case. Dun & Bradstreet Holdings, Inc. (NYSE:DNB) is the most popular stock in this table. On the other hand Pinnacle West Capital Corporation (NYSE:PNW) is the least popular one with only 18 bullish hedge fund positions. AECOM (NYSE:ACM) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for ACM is 49.5. 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. 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 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 24.9% in 2021 through October 15th and beat the market again by 4.5 percentage points. Unfortunately ACM wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on ACM were disappointed as the stock returned 0.3% since the end of June (through 10/15) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as many of these stocks already outperformed the market since 2019.

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