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 (10 coronavirus predictions).
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. Hedge Funds and other institutional investors have just completed filing their 13Fs with the Securities and Exchange Commission, revealing their equity portfolios as of the end of June. At Insider Monkey, we follow nearly 835 active hedge funds and notable investors and by analyzing their 13F filings, we can determine the stocks that they are collectively bullish on. One of their picks is AptarGroup, Inc. (NYSE:ATR), so let’s take a closer look at the sentiment that surrounds it in the current quarter.
Is AptarGroup, Inc. (NYSE:ATR) the right pick for your portfolio? The smart money is becoming hopeful. The number of long hedge fund positions moved up by 2 in recent months. Our calculations also showed that ATR 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.
Chuck Royce of Royce & 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 we’re going to review the new hedge fund action surrounding AptarGroup, Inc. (NYSE:ATR).
What does smart money think about AptarGroup, Inc. (NYSE:ATR)?
At Q4’s end, a total of 25 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 9% from the third quarter of 2019. By comparison, 17 hedge funds held shares or bullish call options in ATR a year ago. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Adage Capital Management was the largest shareholder of AptarGroup, Inc. (NYSE:ATR), with a stake worth $40.5 million reported as of the end of September. Trailing Adage Capital Management was Royce & Associates, which amassed a stake valued at $21.8 million. Citadel Investment Group, Millennium 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 Sabrepoint Capital allocated the biggest weight to AptarGroup, Inc. (NYSE:ATR), around 2.87% of its 13F portfolio. Royce & Associates is also relatively very bullish on the stock, setting aside 0.19 percent of its 13F equity portfolio to ATR.
As industrywide interest jumped, key money managers have jumped into AptarGroup, Inc. (NYSE:ATR) headfirst. Sabrepoint Capital, managed by George Baxter, created the most outsized position in AptarGroup, Inc. (NYSE:ATR). Sabrepoint Capital had $8.1 million invested in the company at the end of the quarter. Ryan Tolkin (CIO)’s Schonfeld Strategic Advisors also initiated a $1.3 million position during the quarter. The other funds with new positions in the stock are Benjamin A. Smith’s Laurion Capital Management, Ran Pang’s Quantamental Technologies, and Philippe Laffont’s Coatue Management.
Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as AptarGroup, Inc. (NYSE:ATR) but similarly valued. We will take a look at People’s United Financial, Inc. (NASDAQ:PBCT), Signature Bank (NASDAQ:SBNY), AMERCO (NASDAQ:UHAL), and Autoliv Inc. (NYSE:ALV). This group of stocks’ market values resemble ATR’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| PBCT | 22 | 125898 | -3 |
| SBNY | 21 | 461716 | -15 |
| UHAL | 17 | 400076 | 7 |
| ALV | 21 | 729536 | 5 |
| Average | 20.25 | 429307 | -1.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 20.25 hedge funds with bullish positions and the average amount invested in these stocks was $429 million. That figure was $137 million in ATR’s case. People’s United Financial, Inc. (NASDAQ:PBCT) is the most popular stock in this table. On the other hand AMERCO (NASDAQ:UHAL) is the least popular one with only 17 bullish hedge fund positions. Compared to these stocks AptarGroup, Inc. (NYSE:ATR) is more popular among hedge funds. 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 22.3% in 2020 through March 16th but still managed to beat the market by 3.2 percentage points. Hedge funds were also right about betting on ATR, though not to the same extent, as the stock returned -23.8% during the first quarter (through March 16th) and outperformed the market as well.
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.
