Many prominent investors, including Warren Buffett, David Tepper and Stan Druckenmiller, have been cautious regarding the current bull market and missed out as the stock market reached another high in recent weeks. On the other hand, technology hedge funds weren’t timid and registered double digit market beating gains. Financials, energy and industrial stocks initially suffered the most but many of these stocks delivered strong returns since November and hedge funds actually increased their positions in these stocks. In this article we will find out how hedge fund sentiment towards A. O. Smith Corporation (NYSE:AOS) changed recently.
A. O. Smith Corporation (NYSE:AOS) has experienced an increase in hedge fund interest in recent months. A. O. Smith Corporation (NYSE:AOS) was in 29 hedge funds’ portfolios at the end of the third quarter of 2021. The all time high for this statistic is 35. Our calculations also showed that AOS isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings).
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium prices have more than doubled over the past year, so 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. Keeping this in mind let’s review the new hedge fund action regarding A. O. Smith Corporation (NYSE:AOS).
Ryan Tolkin, CIO of Schonfeld Strategic Advisors
Do Hedge Funds Think AOS Is A Good Stock To Buy Now?
At third quarter’s end, a total of 29 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 12% from the second quarter of 2021. By comparison, 30 hedge funds held shares or bullish call options in AOS a year ago. With the smart money’s positions undergoing their usual ebb and flow, there exists an “upper tier” of notable hedge fund managers who were boosting their stakes significantly (or already accumulated large positions).
The largest stake in A. O. Smith Corporation (NYSE:AOS) was held by Impax Asset Management, which reported holding $169 million worth of stock at the end of September. It was followed by Fundsmith LLP with a $108.4 million position. Other investors bullish on the company included Balyasny Asset Management, AQR Capital Management, and Adage Capital Management. In terms of the portfolio weights assigned to each position Impax Asset Management allocated the biggest weight to A. O. Smith Corporation (NYSE:AOS), around 0.69% of its 13F portfolio. Neo Ivy Capital is also relatively very bullish on the stock, setting aside 0.4 percent of its 13F equity portfolio to AOS.
As one would reasonably expect, some big names were breaking ground themselves. Adage Capital Management, managed by Phill Gross and Robert Atchinson, created the most valuable position in A. O. Smith Corporation (NYSE:AOS). Adage Capital Management had $32.7 million invested in the company at the end of the quarter. Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital also initiated a $11.6 million position during the quarter. The following funds were also among the new AOS investors: Michael Gelband’s ExodusPoint Capital, Ryan Tolkin (CIO)’s Schonfeld Strategic Advisors, and Jinghua Yan’s TwinBeech Capital.
Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as A. O. Smith Corporation (NYSE:AOS) but similarly valued. These stocks are Manhattan Associates, Inc. (NASDAQ:MANH), McAfee Corp. (NASDAQ:MCFE), CyrusOne Inc (NASDAQ:CONE), Lithia Motors Inc (NYSE:LAD), Amdocs Limited (NASDAQ:DOX), NiSource Inc. (NYSE:NI), and TFI International Inc. (NYSE:TFII). All of these stocks’ market caps are closest to AOS’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| MANH | 25 | 475224 | -3 |
| MCFE | 31 | 330697 | 13 |
| CONE | 27 | 495607 | 1 |
| LAD | 64 | 2823225 | 1 |
| DOX | 24 | 824398 | -5 |
| NI | 24 | 435539 | -12 |
| TFII | 23 | 270343 | 10 |
| Average | 31.1 | 807862 | 0.7 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 31.1 hedge funds with bullish positions and the average amount invested in these stocks was $808 million. That figure was $565 million in AOS’s case. Lithia Motors Inc (NYSE:LAD) is the most popular stock in this table. On the other hand TFI International Inc. (NYSE:TFII) is the least popular one with only 23 bullish hedge fund positions. A. O. Smith Corporation (NYSE:AOS) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for AOS is 40.2. 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 28.6% in 2021 through November 30th and still beat the market by 5.6 percentage points. A small number of hedge funds were also right about betting on AOS as the stock returned 30% since the end of the third quarter (through 11/30) and outperformed the market by an even larger margin.
Follow Smith A O Corp (NYSE:AOS)
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Disclosure: None. This article was originally published at Insider Monkey.
