We are still in an overall bull market and many stocks that smart money investors were piling into surged through October 17th. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained 45% and 39% respectively. Hedge funds’ top 3 stock picks returned 34.4% this year and beat the S&P 500 ETFs by 13 percentage points. Investing in index funds guarantees you average returns, not superior returns. We are looking to generate superior returns for our readers. That’s why we believe it isn’t a waste of time to check out hedge fund sentiment before you invest in a stock like Altra Industrial Motion Corp. (NASDAQ:AIMC).
Altra Industrial Motion Corp. (NASDAQ:AIMC) has seen a decrease in hedge fund interest lately. Our calculations also showed that AIMC isn’t among the 30 most popular stocks among hedge funds (see the video below).
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
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 25.8% year to date (through May 30th) and outperformed the market even though it draws its stock picks among small-cap stocks. This strategy also outperformed the market by 40 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.
Unlike former hedge manager, Dr. Steve Sjuggerud, who is convinced Dow will soar past 40000, our long-short investment strategy doesn’t rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. Let’s take a look at the new hedge fund action encompassing Altra Industrial Motion Corp. (NASDAQ:AIMC).
Hedge fund activity in Altra Industrial Motion Corp. (NASDAQ:AIMC)
Heading into the third quarter of 2019, a total of 14 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -36% from one quarter earlier. By comparison, 14 hedge funds held shares or bullish call options in AIMC a year ago. With hedge funds’ sentiment swirling, there exists a select group of key hedge fund managers who were boosting their holdings considerably (or already accumulated large positions).
Among these funds, Gates Capital Management held the most valuable stake in Altra Industrial Motion Corp. (NASDAQ:AIMC), which was worth $162.2 million at the end of the second quarter. On the second spot was Citadel Investment Group which amassed $47.8 million worth of shares. Moreover, Pentwater Capital Management, D E Shaw, and Balyasny Asset Management were also bullish on Altra Industrial Motion Corp. (NASDAQ:AIMC), allocating a large percentage of their portfolios to this stock.
Due to the fact that Altra Industrial Motion Corp. (NASDAQ:AIMC) has witnessed falling interest from the aggregate hedge fund industry, it’s safe to say that there was a specific group of hedgies that slashed their positions entirely last quarter. Interestingly, Benjamin A. Smith’s Laurion Capital Management cut the largest investment of the 750 funds followed by Insider Monkey, valued at about $2.5 million in stock, and Sander Gerber’s Hudson Bay Capital Management was right behind this move, as the fund sold off about $1.2 million worth. These moves are interesting, as total hedge fund interest fell by 8 funds last quarter.
Let’s also examine hedge fund activity in other stocks similar to Altra Industrial Motion Corp. (NASDAQ:AIMC). These stocks are PQ Group Holdings Inc. (NYSE:PQG), Acceleron Pharma Inc (NASDAQ:XLRN), Simmons First National Corporation (NASDAQ:SFNC), and Taylor Morrison Home Corp (NYSE:TMHC). This group of stocks’ market valuations are closest to AIMC’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| PQG | 6 | 55623 | 0 |
| XLRN | 21 | 349171 | 0 |
| SFNC | 12 | 31976 | 3 |
| TMHC | 19 | 259749 | 7 |
| Average | 14.5 | 174130 | 2.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 14.5 hedge funds with bullish positions and the average amount invested in these stocks was $174 million. That figure was $272 million in AIMC’s case. Acceleron Pharma Inc (NASDAQ:XLRN) is the most popular stock in this table. On the other hand PQ Group Holdings Inc. (NYSE:PQG) is the least popular one with only 6 bullish hedge fund positions. Altra Industrial Motion Corp. (NASDAQ:AIMC) 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 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Unfortunately AIMC wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); AIMC investors were disappointed as the stock returned -22.4% during the third 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 many of these stocks already outperformed the market so far in 2019.
Disclosure: None. This article was originally published at Insider Monkey.
