Before we spend days researching a stock idea we’d like to take a look at how hedge funds and billionaire investors recently traded that stock. S&P 500 Index ETF (SPY) lost 13.5% in the fourth quarter. Seven out of 11 industry groups in the S&P 500 Index were down more than 20% from their 52-week highs at the trough of the stock market crash. The average return of a randomly picked stock in the index was even worse. This means you (or a monkey throwing a dart) have less than an even chance of beating the market by randomly picking a stock. On the other hand, the top 15 most popular S&P 500 stocks among hedge funds not only recouped their Q4 losses but also outperformed the index by more than 3 percentage points. In this article, we will take a look at what hedge funds think about ABM Industries, Inc. (NYSE:ABM).
ABM Industries, Inc. (NYSE:ABM) investors should be aware of an increase in hedge fund sentiment in recent months. ABM was in 12 hedge funds’ portfolios at the end of December. There were 11 hedge funds in our database with ABM holdings at the end of the previous quarter. Our calculations also showed that abm isn’t among the 30 most popular stocks among hedge funds.
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 market by 32 percentage points since May 2014 through March 12, 2019 (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.
We’re going to take a look at the recent hedge fund action surrounding ABM Industries, Inc. (NYSE:ABM).
How have hedgies been trading ABM Industries, Inc. (NYSE:ABM)?
At the end of the fourth quarter, a total of 12 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 9% from the second quarter of 2018. By comparison, 7 hedge funds held shares or bullish call options in ABM a year ago. With hedge funds’ positions undergoing their usual ebb and flow, there exists an “upper tier” of notable hedge fund managers who were boosting their stakes considerably (or already accumulated large positions).
Among these funds, Millennium Management held the most valuable stake in ABM Industries, Inc. (NYSE:ABM), which was worth $22.1 million at the end of the third quarter. On the second spot was Royce & Associates which amassed $12 million worth of shares. Moreover, GLG Partners, Gotham Asset Management, and Marshall Wace LLP were also bullish on ABM Industries, Inc. (NYSE:ABM), allocating a large percentage of their portfolios to this stock.
As one would reasonably expect, key money managers were leading the bulls’ herd. Balyasny Asset Management, managed by Dmitry Balyasny, initiated the most valuable position in ABM Industries, Inc. (NYSE:ABM). Balyasny Asset Management had $0.8 million invested in the company at the end of the quarter.
Let’s check out hedge fund activity in other stocks similar to ABM Industries, Inc. (NYSE:ABM). These stocks are CoreCivic, Inc. (NYSE:CXW), Halozyme Therapeutics, Inc. (NASDAQ:HALO), First Midwest Bancorp Inc (NASDAQ:FMBI), and Werner Enterprises, Inc. (NASDAQ:WERN). This group of stocks’ market values are similar to ABM’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| CXW | 21 | 143123 | 8 |
| HALO | 16 | 199336 | -5 |
| FMBI | 12 | 64807 | 4 |
| WERN | 14 | 104958 | -3 |
| Average | 15.75 | 128056 | 1 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 15.75 hedge funds with bullish positions and the average amount invested in these stocks was $128 million. That figure was $49 million in ABM’s case. CoreCivic, Inc. (NYSE:CXW) is the most popular stock in this table. On the other hand First Midwest Bancorp Inc (NASDAQ:FMBI) is the least popular one with only 12 bullish hedge fund positions. Compared to these stocks ABM Industries, Inc. (NYSE:ABM) is even less popular than FMBI. Our calculations showed that top 15 most popular stocks) among hedge funds returned 24.2% through April 22nd and outperformed the S&P 500 ETF (SPY) by more than 7 percentage points. A small number of hedge funds were also right about betting on ABM, though not to the same extent, as the stock returned 18% and outperformed the market as well.
Disclosure: None. This article was originally published at Insider Monkey.
