We hate to say this but, we told you so. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW and predicted a US recession when the S&P 500 Index was trading at the 3150 level. We also told you to short the market and buy long-term Treasury bonds. Our article also called for a total international travel ban. While we were warning you, President Trump minimized the threat and failed to act promptly. As a result of his inaction, we will now experience a deeper recession (see why hell is coming).
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. Keeping this in mind let’s see whether Amkor Technology, Inc. (NASDAQ:AMKR) represents a good buying opportunity at the moment. Let’s quickly check the hedge fund interest towards the company. Hedge fund firms constantly search out bright intellectuals and highly-experienced employees and throw away millions of dollars on satellite photos and other research activities, so it is no wonder why they tend to generate millions in profits each year. It is also true that some hedge fund players fail inconceivably on some occasions, but net net their stock picks have been generating superior risk-adjusted returns on average over the years.
Is Amkor Technology, Inc. (NASDAQ:AMKR) ready to rally soon? Prominent investors are getting more optimistic. The number of bullish hedge fund positions increased by 2 in recent months. Our calculations also showed that AMKR isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of this article for Q3 rankings).
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 41 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.
Ray Dalio of Bridgewater Associates
We leave no stone unturned when looking for the next great investment idea. For example we recently identified a stock that trades 25% below the net cash on its balance sheet. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences, and go through short-term trade recommendations like this one. We even check out the recommendations of services with hard to believe track records. 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 let’s go over the key hedge fund action regarding Amkor Technology, Inc. (NASDAQ:AMKR).
How have hedgies been trading Amkor Technology, Inc. (NASDAQ:AMKR)?
Heading into the first quarter of 2020, a total of 29 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 7% from the third quarter of 2019. Below, you can check out the change in hedge fund sentiment towards AMKR over the last 18 quarters. With hedgies’ sentiment swirling, there exists an “upper tier” of noteworthy hedge fund managers who were adding to their stakes significantly (or already accumulated large positions).
More specifically, D E Shaw was the largest shareholder of Amkor Technology, Inc. (NASDAQ:AMKR), with a stake worth $32.7 million reported as of the end of September. Trailing D E Shaw was Renaissance Technologies, which amassed a stake valued at $31.1 million. Arrowstreet Capital, Shellback Capital, and AQR Capital Management were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Shellback Capital allocated the biggest weight to Amkor Technology, Inc. (NASDAQ:AMKR), around 2.18% of its 13F portfolio. Signition LP is also relatively very bullish on the stock, designating 0.72 percent of its 13F equity portfolio to AMKR.
With a general bullishness amongst the heavyweights, key hedge funds were leading the bulls’ herd. Shellback Capital, managed by Doug Gordon, Jon Hilsabeck and Don Jabro, initiated the biggest position in Amkor Technology, Inc. (NASDAQ:AMKR). Shellback Capital had $19.5 million invested in the company at the end of the quarter. Peter Algert and Kevin Coldiron’s Algert Coldiron Investors also made a $0.8 million investment in the stock during the quarter. The other funds with brand new AMKR positions are Ray Dalio’s Bridgewater Associates, Benjamin A. Smith’s Laurion Capital Management, and George Zweig, Shane Haas and Ravi Chander’s Signition LP.
Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Amkor Technology, Inc. (NASDAQ:AMKR) but similarly valued. These stocks are Legg Mason, Inc. (NYSE:LM), Anixter International Inc. (NYSE:AXE), Old National Bancorp (NASDAQ:ONB), and Novanta Inc. (NASDAQ:NOVT). This group of stocks’ market values match AMKR’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| LM | 37 | 434299 | 9 |
| AXE | 43 | 616473 | 23 |
| ONB | 14 | 37866 | 3 |
| NOVT | 14 | 88192 | 2 |
| Average | 27 | 294208 | 9.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 27 hedge funds with bullish positions and the average amount invested in these stocks was $294 million. That figure was $199 million in AMKR’s case. Anixter International Inc. (NYSE:AXE) is the most popular stock in this table. On the other hand Old National Bancorp (NASDAQ:ONB) is the least popular one with only 14 bullish hedge fund positions. Amkor Technology, Inc. (NASDAQ:AMKR) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but 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 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks lost 17.4% in 2020 through March 25th but beat the market by 5.5 percentage points. Unfortunately AMKR wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on AMKR were disappointed as the stock returned -36.5% during the same time period 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 this year.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.
