Here is What Hedge Funds Think About Atento SA (ATTO)

After several tireless days we have finished crunching the numbers from nearly 900 13F filings issued by the elite hedge funds and other investment firms that we track at Insider Monkey, which disclosed those firms’ equity portfolios as of March 31st. The results of that effort will be put on display in this article, as we share valuable insight into the smart money sentiment towards Atento SA (NYSE:ATTO).

Is Atento SA (NYSE:ATTO) going to take off soon? Money managers were cutting their exposure. The number of bullish hedge fund bets dropped by 1 lately. Atento SA (NYSE:ATTO) was in 5 hedge funds’ portfolios at the end of the first quarter of 2021. The all time high for this statistic is 13. Our calculations also showed that ATTO isn’t among the 30 most popular stocks among hedge funds (click for Q1 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 115 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.

Peter Rathjens of Arrowstreet Capital

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, an activist hedge fund owns nearly 40% of this $23 biotech stock and is trying to buy the rest for around $50. So, we recommended a long position to our monthly premium newsletter subscribers. We go through lists like the 10 best battery stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our homepage. Keeping this in mind let’s take a peek at the recent hedge fund action regarding Atento SA (NYSE:ATTO).

Do Hedge Funds Think ATTO Is A Good Stock To Buy Now?

At first quarter’s end, a total of 5 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -17% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in ATTO over the last 23 quarters. With hedgies’ sentiment swirling, there exists an “upper tier” of notable hedge fund managers who were upping their holdings considerably (or already accumulated large positions).

Among these funds, HPS Investment Partners held the most valuable stake in Atento SA (NYSE:ATTO), which was worth $79.9 million at the end of the fourth quarter. On the second spot was Farallon Capital which amassed $46.8 million worth of shares. Renaissance Technologies, Royce & Associates, and Arrowstreet Capital 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 HPS Investment Partners allocated the biggest weight to Atento SA (NYSE:ATTO), around 56.55% of its 13F portfolio. Farallon Capital is also relatively very bullish on the stock, dishing out 0.26 percent of its 13F equity portfolio to ATTO.

We view hedge fund activity in the stock unfavorable, but in this case there was only a single hedge fund selling its entire position: Plaisance Capital. One hedge fund selling its entire position doesn’t always imply a bearish intent. Theoretically a hedge fund may decide to sell a promising position in order to invest the proceeds in a more promising idea. However, we don’t think this is the case in this case because none of the 750+ hedge funds tracked by Insider Monkey identified ATTO as a viable investment and initiated a position in the stock.

Let’s now review hedge fund activity in other stocks similar to Atento SA (NYSE:ATTO). These stocks are Neuronetics, Inc. (NASDAQ:STIM), Ceragon Networks Ltd. (NASDAQ:CRNT), Home Bancorp, Inc. (NASDAQ:HBCP), Coastal Financial Corporation (NASDAQ:CCB), Commercial Vehicle Group, Inc. (NASDAQ:CVGI), Investors Title Company (NASDAQ:ITIC), and TFF Pharmaceuticals, Inc. (NASDAQ:TFFP). All of these stocks’ market caps resemble ATTO’s market cap.

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As you can see these stocks had an average of 9.7 hedge funds with bullish positions and the average amount invested in these stocks was $49 million. That figure was $128 million in ATTO’s case. Neuronetics, Inc. (NASDAQ:STIM) is the most popular stock in this table. On the other hand Home Bancorp, Inc. (NASDAQ:HBCP) is the least popular one with only 2 bullish hedge fund positions. Atento SA (NYSE:ATTO) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for ATTO is 24.4. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 17.4% in 2021 through June 18th and surpassed the market again by 6.1 percentage points. Unfortunately ATTO wasn’t nearly as popular as these 5 stocks (hedge fund sentiment was quite bearish); ATTO investors were disappointed as the stock returned 1% since the end of March (through 6/18) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2021.

Disclosure: None. This article was originally published at Insider Monkey.