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 take a look at whether Amphenol Corporation (NYSE:APH) is a good investment right now. We at Insider Monkey like to examine what billionaires and hedge funds think of a company before spending days of research on it. Given their 2 and 20 payment structure, hedge funds have more incentives and resources than the average investor. The funds have access to expert networks and get tips from industry insiders. They also employ numerous Ivy League graduates and MBAs. Like everyone else, hedge funds perform miserably at times, but their consensus picks have historically outperformed the market after risk adjustments.
Amphenol Corporation (NYSE:APH) investors should be aware of an increase in activity from the world’s largest hedge funds in recent months. APH was in 36 hedge funds’ portfolios at the end of December. There were 33 hedge funds in our database with APH positions at the end of the previous quarter. Our calculations also showed that APH 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).
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by more than 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’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 35.3% through March 3rd. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Phill Gross of Adage Capital Management
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. Keeping this in mind we’re going to go over the fresh hedge fund action encompassing Amphenol Corporation (NYSE:APH).
Hedge fund activity in Amphenol Corporation (NYSE:APH)
At Q4’s end, a total of 36 of the hedge funds tracked by Insider Monkey were long this stock, a change of 9% from the previous quarter. On the other hand, there were a total of 21 hedge funds with a bullish position in APH a year ago. With hedgies’ capital changing hands, there exists an “upper tier” of noteworthy hedge fund managers who were boosting their stakes considerably (or already accumulated large positions).
More specifically, Select Equity Group was the largest shareholder of Amphenol Corporation (NYSE:APH), with a stake worth $461.2 million reported as of the end of September. Trailing Select Equity Group was Woodline Partners, which amassed a stake valued at $54 million. Millennium Management, Adage Capital Management, 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 Ayrshire Capital Management allocated the biggest weight to Amphenol Corporation (NYSE:APH), around 3.3% of its 13F portfolio. Thames Capital Management is also relatively very bullish on the stock, earmarking 3.24 percent of its 13F equity portfolio to APH.
With a general bullishness amongst the heavyweights, key hedge funds have jumped into Amphenol Corporation (NYSE:APH) headfirst. Woodline Partners, managed by Michael Rockefeller and Karl Kroeker, initiated the biggest position in Amphenol Corporation (NYSE:APH). Woodline Partners had $54 million invested in the company at the end of the quarter. Israel Englander’s Millennium Management also initiated a $44 million position during the quarter. The following funds were also among the new APH investors: Schonfeld Strategic Advisors, Donald Sussman’s Paloma Partners, and Matthew Tewksbury’s Stevens Capital Management.
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Amphenol Corporation (NYSE:APH) but similarly valued. These stocks are TE Connectivity Ltd. (NYSE:TEL), CRH PLC (NYSE:CRH), Ingersoll-Rand Plc (NYSE:IR), and Sirius XM Holdings Inc (NASDAQ:SIRI). All of these stocks’ market caps resemble APH’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| TEL | 44 | 1839961 | 10 |
| CRH | 5 | 184422 | -4 |
| IR | 47 | 1411941 | 2 |
| SIRI | 31 | 1431150 | -5 |
| Average | 31.75 | 1216869 | 0.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 31.75 hedge funds with bullish positions and the average amount invested in these stocks was $1217 million. That figure was $716 million in APH’s case. Ingersoll-Rand Plc (NYSE:IR) is the most popular stock in this table. On the other hand CRH PLC (NYSE:CRH) is the least popular one with only 5 bullish hedge fund positions. Amphenol Corporation (NYSE:APH) 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 APH wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on APH were disappointed as the stock returned -30.6% 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.
