We know that hedge funds generate strong, risk-adjusted returns over the long run, which is why imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, professional investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn’t mean that they don’t have occasional colossal losses; they do. However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, let’s examine the smart money sentiment towards Amalgamated Bank (NASDAQ:AMAL) and determine whether hedge funds skillfully traded this stock.
Amalgamated Bank (NASDAQ:AMAL) was in 12 hedge funds’ portfolios at the end of March. AMAL shareholders have witnessed an increase in enthusiasm from smart money in recent months. There were 10 hedge funds in our database with AMAL holdings at the end of the previous quarter. Our calculations also showed that AMAL 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 market participants, hedge funds are assumed to be unimportant, old investment tools of the past. While there are more than 8000 funds in operation at present, We choose to focus on the top tier of this club, about 850 funds. These money managers command the majority of the smart money’s total capital, and by following their matchless stock picks, Insider Monkey has spotted various investment strategies that have historically surpassed the market. Insider Monkey’s flagship short hedge fund strategy surpassed 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 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 .
Phill Gross of Adage Capital Management
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. Keeping this in mind we’re going to analyze the fresh hedge fund action surrounding Amalgamated Bank (NASDAQ:AMAL).
Hedge fund activity in Amalgamated Bank (NASDAQ:AMAL)
Heading into the second quarter of 2020, a total of 12 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 20% from the previous quarter. The graph below displays the number of hedge funds with bullish position in AMAL over the last 18 quarters. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Amalgamated Bank (NASDAQ:AMAL) was held by Adage Capital Management, which reported holding $14.3 million worth of stock at the end of September. It was followed by Mendon Capital Advisors with a $4.3 million position. Other investors bullish on the company included Millennium Management, Azora Capital, and Renaissance Technologies. In terms of the portfolio weights assigned to each position Mendon Capital Advisors allocated the biggest weight to Amalgamated Bank (NASDAQ:AMAL), around 2.13% of its 13F portfolio. Azora Capital is also relatively very bullish on the stock, designating 0.85 percent of its 13F equity portfolio to AMAL.
With a general bullishness amongst the heavyweights, key hedge funds were leading the bulls’ herd. Engineers Gate Manager, managed by Greg Eisner, assembled the largest position in Amalgamated Bank (NASDAQ:AMAL). Engineers Gate Manager had $0.3 million invested in the company at the end of the quarter. Peter Muller’s PDT Partners also made a $0.1 million investment in the stock during the quarter.
Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Amalgamated Bank (NASDAQ:AMAL) but similarly valued. We will take a look at Central Puerto S.A. (NYSE:CEPU), Viking Therapeutics, Inc. (NASDAQ:VKTX), Tutor Perini Corp (NYSE:TPC), and MidWestOne Financial Group, Inc. (NASDAQ:MOFG). This group of stocks’ market valuations resemble AMAL’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| CEPU | 6 | 5446 | 1 |
| VKTX | 17 | 24942 | 3 |
| TPC | 10 | 12342 | -5 |
| MOFG | 9 | 10690 | 2 |
| Average | 10.5 | 13355 | 0.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 10.5 hedge funds with bullish positions and the average amount invested in these stocks was $13 million. That figure was $28 million in AMAL’s case. Viking Therapeutics, Inc. (NASDAQ:VKTX) is the most popular stock in this table. On the other hand Central Puerto S.A. (NYSE:CEPU) is the least popular one with only 6 bullish hedge fund positions. Amalgamated Bank (NASDAQ:AMAL) 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 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 beat the market by 15.5 percentage points. Unfortunately AMAL wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on AMAL were disappointed as the stock returned 17.8% 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 10 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.
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Disclosure: None. This article was originally published at Insider Monkey.
