In this article you are going to find out whether hedge funds think Altus Midstream Company (NASDAQ:ALTM) 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.
Hedge fund interest in Altus Midstream Company (NASDAQ:ALTM) shares was flat at the end of last quarter. This is usually a negative indicator. At the end of this article we will also compare ALTM to other stocks including Ares Commercial Real Estate Corp (NYSE:ACRE), Limoneira Company (NASDAQ:LMNR), and Alico, Inc. (NASDAQ:ALCO) to get a better sense of its popularity.
Video: 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’ 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 44 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.
Ken Griffin of Citadel Investment Group
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, we are still not out of the woods in terms of the coronavirus pandemic. So, we checked out this analyst’s “corona catalyst plays“. We interview hedge fund managers and ask them about their best ideas. You can watch our latest hedge fund manager interview here and find out the name of the large-cap healthcare stock that Sio Capital’s Michael Castor expects to double. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind we’re going to take a peek at the key hedge fund action surrounding Altus Midstream Company (NASDAQ:ALTM).
What does smart money think about Altus Midstream Company (NASDAQ:ALTM)?
At Q1’s end, a total of 3 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 0% from one quarter earlier. By comparison, 6 hedge funds held shares or bullish call options in ALTM a year ago. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Altus Midstream Company (NASDAQ:ALTM) was held by Adage Capital Management, which reported holding $1.3 million worth of stock at the end of September. It was followed by Yaupon Capital with a $0.1 million position. The only other hedge fund that is bullish on the company was Citadel Investment Group.
Earlier we told you that the aggregate hedge fund interest in the stock was unchanged and we view this as a negative development. Even though there weren’t any hedge funds dumping their holdings during the third quarter, there weren’t any hedge funds initiating brand new positions. This indicates that hedge funds, at the very best, perceive this stock as dead money and they haven’t identified any viable catalysts that can attract investor attention.
Let’s go over hedge fund activity in other stocks similar to Altus Midstream Company (NASDAQ:ALTM). These stocks are Ares Commercial Real Estate Corp (NYSE:ACRE), Limoneira Company (NASDAQ:LMNR), Alico, Inc. (NASDAQ:ALCO), and Bonanza Creek Energy Inc (NYSE:BCEI). This group of stocks’ market caps resemble ALTM’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| ACRE | 10 | 20465 | 0 |
| LMNR | 1 | 210 | 0 |
| ALCO | 8 | 18950 | -1 |
| BCEI | 13 | 47803 | -3 |
| Average | 8 | 21857 | -1 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 8 hedge funds with bullish positions and the average amount invested in these stocks was $22 million. That figure was $1 million in ALTM’s case. Bonanza Creek Energy Inc (NYSE:BCEI) is the most popular stock in this table. On the other hand Limoneira Company (NASDAQ:LMNR) is the least popular one with only 1 bullish hedge fund positions. Altus Midstream Company (NASDAQ:ALTM) 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 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 7.9% in 2020 through May 22nd and surpassed the market by 15.6 percentage points. Unfortunately ALTM wasn’t nearly as popular as these 10 stocks (hedge fund sentiment was quite bearish); ALTM investors were disappointed as the stock returned -21.3% during the second 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 10 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.
Disclosure: None. This article was originally published at Insider Monkey.
