How do you pick the next stock to invest in? One way would be to spend days of research browsing through thousands of publicly traded companies. However, an easier way is to look at the stocks that smart money investors are collectively bullish on. Hedge funds and other institutional investors usually invest large amounts of capital and have to conduct due diligence while choosing their next pick. They don’t always get it right, but, on average, their stock picks historically generated strong returns after adjusting for known risk factors. With this in mind, let’s take a look at the recent hedge fund activity surrounding Ameresco Inc (NYSE:AMRC) and determine whether hedge funds had an edge regarding this stock.
Ameresco Inc (NYSE:AMRC) investors should be aware of an increase in hedge fund interest recently. Our calculations also showed that AMRC isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks).
Video: Watch our video about the top 5 most popular hedge fund stocks.
If you’d ask most traders, hedge funds are assumed to be slow, old financial vehicles of the past. While there are more than 8000 funds trading today, Our researchers hone in on the crème de la crème of this club, around 850 funds. It is estimated that this group of investors watch over most of all hedge funds’ total asset base, and by monitoring their top picks, Insider Monkey has unsheathed several investment strategies that have historically defeated the broader indices. Insider Monkey’s flagship short hedge fund strategy surpassed the S&P 500 short ETFs by around 20 percentage points a year since its inception in March 2017. Our portfolio of short stocks lost 36% since February 2017 (through May 18th) even though the market was up 30% during the same period. We just shared a list of 8 short targets in our latest quarterly update .
Ken Griffin of Citadel Investment Group
At Insider Monkey we scour multiple sources to uncover the next great investment idea. There is a lot of volatility in the markets and this presents amazing investment opportunities from time to time. For example, this trader claims to deliver juiced up returns with one trade a week, so we are checking out his highest conviction idea. A second trader claims to score lucrative profits by utilizing a “weekend trading strategy”, so we look into his strategy’s picks. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We recently recommended several stocks partly inspired by legendary Bill Miller’s investor letter. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 in February after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind let’s take a look at the new hedge fund action encompassing Ameresco Inc (NYSE:AMRC).
How are hedge funds trading Ameresco Inc (NYSE:AMRC)?
At the end of the first quarter, a total of 11 of the hedge funds tracked by Insider Monkey were long this stock, a change of 38% from the previous quarter. On the other hand, there were a total of 10 hedge funds with a bullish position in AMRC a year ago. With hedge funds’ sentiment swirling, there exists an “upper tier” of key hedge fund managers who were adding to their holdings substantially (or already accumulated large positions).
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Chuck Royce’s Royce & Associates has the biggest position in Ameresco Inc (NYSE:AMRC), worth close to $20.3 million, amounting to 0.3% of its total 13F portfolio. Sitting at the No. 2 spot is Gregory Bylinsky and Jefferson Gramm of Bandera Partners, with a $12.3 million position; 10.3% of its 13F portfolio is allocated to the stock. Some other members of the smart money with similar optimism comprise Till Bechtolsheimer’s Arosa Capital Management, Campbell Wilson’s Old Well Partners and Renaissance Technologies. In terms of the portfolio weights assigned to each position Bandera Partners allocated the biggest weight to Ameresco Inc (NYSE:AMRC), around 10.32% of its 13F portfolio. Old Well Partners is also relatively very bullish on the stock, setting aside 1.7 percent of its 13F equity portfolio to AMRC.
As industrywide interest jumped, key money managers were breaking ground themselves. Renaissance Technologies, initiated the largest position in Ameresco Inc (NYSE:AMRC). Renaissance Technologies had $1 million invested in the company at the end of the quarter. Peter Muller’s PDT Partners also initiated a $0.4 million position during the quarter. The only other fund with a new position in the stock is Ken Griffin’s Citadel Investment Group.
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Ameresco Inc (NYSE:AMRC) but similarly valued. We will take a look at Huami Corporation (NYSE:HMI), QAD Inc. (NASDAQ:QADA), Fiverr International Ltd. (NYSE:FVRR), and Compass Diversified Holdings LLC (NYSE:CODI). This group of stocks’ market valuations resemble AMRC’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| HMI | 5 | 20451 | -4 |
| QADA | 16 | 120856 | 1 |
| FVRR | 13 | 54896 | 2 |
| CODI | 4 | 2635 | -2 |
| Average | 9.5 | 49710 | -0.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 9.5 hedge funds with bullish positions and the average amount invested in these stocks was $50 million. That figure was $46 million in AMRC’s case. QAD Inc. (NASDAQ:QADA) is the most popular stock in this table. On the other hand Compass Diversified Holdings LLC (NYSE:CODI) is the least popular one with only 4 bullish hedge fund positions. Ameresco Inc (NYSE:AMRC) is not the most popular stock in this group but hedge fund interest is still above average. 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 12.3% in 2020 through June 30th but still beat the market by 15.5 percentage points. Hedge funds were also right about betting on AMRC as the stock returned 63.1% in Q2 and outperformed the market. Hedge funds were rewarded for their relative bullishness.
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Disclosure: None. This article was originally published at Insider Monkey.
