Many investors, including Paul Tudor Jones or Stan Druckenmiller, have been saying before the Q4 market crash that the stock market is overvalued due to a low interest rate environment that leads to companies swapping their equity for debt and focusing mostly on short-term performance such as beating the quarterly earnings estimates. In the first half of 2019, most investors recovered all of their Q4 losses as sentiment shifted and optimism dominated the US China trade negotiations. Nevertheless, many of the stocks that delivered strong returns in the first half still sport strong fundamentals and their gains were more related to the general market sentiment rather than their individual performance and hedge funds kept their bullish stance. In this article we will find out how hedge fund sentiment to ADT Inc. (NYSE:ADT) changed recently.
ADT Inc. (NYSE:ADT) has experienced an increase in hedge fund sentiment of late. ADT was in 20 hedge funds’ portfolios at the end of the second quarter of 2019. There were 16 hedge funds in our database with ADT holdings at the end of the previous quarter. Our calculations also showed that ADT isn’t among the 30 most popular stocks among hedge funds (view the video below).
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
To most stock holders, hedge funds are perceived as slow, outdated investment vehicles of the past. While there are greater than 8000 funds trading at present, We look at the aristocrats of this club, around 750 funds. These money managers manage the majority of the hedge fund industry’s total asset base, and by keeping an eye on their unrivaled equity investments, Insider Monkey has spotted a few investment strategies that have historically outrun the S&P 500 index. Insider Monkey’s flagship hedge fund strategy exceeded the S&P 500 index by around 5 percentage points per annum since its inception in May 2014. We were able to generate large returns even by identifying short candidates. Our portfolio of short stocks lost 25.7% since February 2017 (through September 30th) even though the market was up more than 33% during the same period. We just shared a list of 10 short targets in our latest quarterly update .
We only rely on hedge fund buy/sell signals. Let’s view the recent hedge fund action surrounding ADT Inc. (NYSE:ADT).
Hedge fund activity in ADT Inc. (NYSE:ADT)
At the end of the second quarter, a total of 20 of the hedge funds tracked by Insider Monkey were long this stock, a change of 25% from one quarter earlier. On the other hand, there were a total of 15 hedge funds with a bullish position in ADT 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 ADT Inc. (NYSE:ADT) was held by Miller Value Partners, which reported holding $99.1 million worth of stock at the end of March. It was followed by Greenhouse Funds with a $18.5 million position. Other investors bullish on the company included Arrowstreet Capital, GLG Partners, and Millennium Management.
Now, key money managers were leading the bulls’ herd. Miller Value Partners, managed by Bill Miller, initiated the most valuable position in ADT Inc. (NYSE:ADT). Miller Value Partners had $99.1 million invested in the company at the end of the quarter. Noam Gottesman’s GLG Partners also made a $7.4 million investment in the stock during the quarter. The following funds were also among the new ADT investors: Brandon Haley’s Holocene Advisors, Alec Litowitz and Ross Laser’s Magnetar Capital, and Michael Gelband’s ExodusPoint Capital.
Let’s go over hedge fund activity in other stocks similar to ADT Inc. (NYSE:ADT). We will take a look at Tilray, Inc. (NASDAQ:TLRY), Luckin Coffee Inc. (NASDAQ:LK), WPX Energy Inc (NYSE:WPX), and Horizon Therapeutics Public Limited Company (NASDAQ:HZNP). All of these stocks’ market caps resemble ADT’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| TLRY | 11 | 26085 | 1 |
| LK | 31 | 378737 | 31 |
| WPX | 40 | 726310 | -2 |
| HZNP | 34 | 1221612 | -7 |
| Average | 29 | 588186 | 5.75 |
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 $588 million. That figure was $157 million in ADT’s case. WPX Energy Inc (NYSE:WPX) is the most popular stock in this table. On the other hand Tilray, Inc. (NASDAQ:TLRY) is the least popular one with only 11 bullish hedge fund positions. ADT Inc. (NYSE:ADT) is not the least popular stock in this group but hedge fund interest is still below average. 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. A small number of hedge funds were also right about betting on ADT, though not to the same extent, as the stock returned 3.1% during the third quarter and outperformed the market.
Disclosure: None. This article was originally published at Insider Monkey.
