Coronavirus is probably the #1 concern in investors’ minds right now. It should be. On February 27th we publish an article with the title “Recession is Imminent: We Need A Travel Ban NOW”. We predicted that a US recession is imminent and US stocks will go down by at least 20% in the next 3-6 months. We also told you to short the market ETFs and buy long-term bonds. Investors who agreed with us and replicated these trades are up double digits whereas the market is down double digits. Our article also called for a total international travel ban to prevent the spread of the coronavirus especially from Europe. We were one step ahead of the markets and the president.
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. Out of thousands of stocks that are currently traded on the market, it is difficult to identify those that will really generate strong returns. Hedge funds and institutional investors spend millions of dollars on analysts with MBAs and PhDs, who are industry experts and well connected to other industry and media insiders on top of that. Individual investors can piggyback the hedge funds employing these talents and can benefit from their vast resources and knowledge in that way. We analyze quarterly 13F filings of nearly 835 hedge funds and, by looking at the smart money sentiment that surrounds a stock, we can determine whether it has the potential to beat the market over the long-term. Therefore, let’s take a closer look at what smart money thinks about Air Products & Chemicals, Inc. (NYSE:APD).
Is Air Products & Chemicals, Inc. (NYSE:APD) a bargain? The best stock pickers are in an optimistic mood. The number of bullish hedge fund positions rose by 13 in recent months. Our calculations also showed that APD isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video below for Q3 rankings). APD was in 54 hedge funds’ portfolios at the end of December. There were 41 hedge funds in our database with APD holdings at the end of the previous quarter.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
In the eyes of most stock holders, hedge funds are viewed as unimportant, outdated investment tools of yesteryear. While there are over 8000 funds in operation today, We look at the masters of this club, approximately 850 funds. These investment experts command bulk of the smart money’s total asset base, and by following their top investments, Insider Monkey has spotted numerous investment strategies that have historically surpassed Mr. Market. Insider Monkey’s flagship short hedge fund strategy beat the S&P 500 short ETFs by around 20 percentage points per year since its inception in March 2017. Our portfolio of short stocks lost 35.3% since February 2017 (through March 3rd) even though the market was up more than 35% during the same period. We just shared a list of 7 short targets in our latest quarterly update .
Phill Gross of Adage Capital Management
We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world’s largest cannabis market, so we check out this European marijuana stock pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences, and and go through short-term trade recommendations like this one. We even check out the recommendations of services with hard to believe track records. In January, we recommended a long position in one of the most shorted stocks in the market, and that stock returned more than 50% despite the large losses in the market since our recommendation. With all of this in mind let’s take a glance at the key hedge fund action surrounding Air Products & Chemicals, Inc. (NYSE:APD).
Hedge fund activity in Air Products & Chemicals, Inc. (NYSE:APD)
At Q4’s end, a total of 54 of the hedge funds tracked by Insider Monkey were long this stock, a change of 32% from the previous quarter. On the other hand, there were a total of 36 hedge funds with a bullish position in APD 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.
Among these funds, Adage Capital Management held the most valuable stake in Air Products & Chemicals, Inc. (NYSE:APD), which was worth $89.5 million at the end of the third quarter. On the second spot was Two Sigma Advisors which amassed $80.9 million worth of shares. Citadel Investment Group, Luminus 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 Freshford Capital Management allocated the biggest weight to Air Products & Chemicals, Inc. (NYSE:APD), around 9.15% of its 13F portfolio. Claar Advisors is also relatively very bullish on the stock, designating 7.42 percent of its 13F equity portfolio to APD.
Now, key money managers have jumped into Air Products & Chemicals, Inc. (NYSE:APD) headfirst. Echo Street Capital Management, managed by Greg Poole, established the biggest position in Air Products & Chemicals, Inc. (NYSE:APD). Echo Street Capital Management had $39.7 million invested in the company at the end of the quarter. Dmitry Balyasny’s Balyasny Asset Management also initiated a $20.8 million position during the quarter. The other funds with brand new APD positions are Andrew Byington’s Appian Way Asset Management, Michael Cowley’s Sandbar Asset Management, and Minhua Zhang’s Weld Capital Management.
Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Air Products & Chemicals, Inc. (NYSE:APD) but similarly valued. We will take a look at Vodafone Group Plc (NASDAQ:VOD), Intercontinental Exchange Inc (NYSE:ICE), JD.Com Inc (NASDAQ:JD), and ABB Ltd (NYSE:ABB). This group of stocks’ market valuations resemble APD’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| VOD | 16 | 758597 | -4 |
| ICE | 52 | 2712531 | 3 |
| JD | 63 | 6041314 | 3 |
| ABB | 10 | 372334 | -3 |
| Average | 35.25 | 2471194 | -0.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 35.25 hedge funds with bullish positions and the average amount invested in these stocks was $2471 million. That figure was $737 million in APD’s case. JD.Com Inc (NASDAQ:JD) is the most popular stock in this table. On the other hand ABB Ltd (NYSE:ABB) is the least popular one with only 10 bullish hedge fund positions. Air Products & Chemicals, Inc. (NYSE:APD) is not the most popular stock in this group but hedge fund interest is still above average. 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 12.9% in 2020 through March 9th but still beat the market by 1.9 percentage points. Hedge funds were also right about betting on APD as the stock returned -12.7% during the first quarter (through March 9th) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
Disclosure: None. This article was originally published at Insider Monkey.
