“Since 2006, value stocks (IVE vs IVW) have underperformed 11 of the 13 calendar years and when they beat growth, it wasn’t by much. Cumulatively, through this week, it has been a 122% differential (up 52% for value vs up 174% for growth). This appears to be the longest and most severe drought for value investors since data collection began. It will go our way eventually as there are too many people paying far too much for today’s darlings, both public and private. Further, the ten-year yield of 2.5% (pre-tax) isn’t attractive nor is real estate. We believe the value part of the global equity market is the only place to earn solid risk adjusted returns and we believe those returns will be higher than normal,” said Vilas Fund in its Q1 investor letter. We aren’t sure whether value stocks outperform growth, but we follow hedge fund investor letters to understand where the markets and stocks might be going. This article will lay out and discuss the hedge fund and institutional investor sentiment towards ADT Inc. (NYSE:ADT).
ADT Inc. (NYSE:ADT) was in 16 hedge funds’ portfolios at the end of March. ADT has seen an increase in support from the world’s most elite money managers lately. There were 15 hedge funds in our database with ADT holdings at the end of the previous quarter. Our calculations also showed that adt isn’t among the 30 most popular stocks among hedge funds.
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s flagship best performing hedge funds strategy returned 25.8% year to date (through May 30th) and outperformed the market even though it draws its stock picks among small-cap stocks. This strategy also outperformed the market by 40 percentage points since its inception (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
Let’s take a peek at the key hedge fund action surrounding ADT Inc. (NYSE:ADT).
How are hedge funds trading ADT Inc. (NYSE:ADT)?
At the end of the first quarter, a total of 16 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 7% from the fourth quarter of 2018. By comparison, 19 hedge funds held shares or bullish call options in ADT a year ago. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Of the funds tracked by Insider Monkey, Amish Mehta’s SQN Investors has the largest position in ADT Inc. (NYSE:ADT), worth close to $36.3 million, corresponding to 3.4% of its total 13F portfolio. On SQN Investors’s heels is Arrowstreet Capital, led by Peter Rathjens, Bruce Clarke and John Campbell, holding a $15.6 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Other members of the smart money with similar optimism encompass Joe Milano’s Greenhouse Funds, Genevieve Kahr’s Ailanthus Capital Management and Alexander Roepers’s Atlantic Investment Management.
As one would reasonably expect, some big names have been driving this bullishness. Ailanthus Capital Management, managed by Genevieve Kahr, initiated the most outsized position in ADT Inc. (NYSE:ADT). Ailanthus Capital Management had $9.6 million invested in the company at the end of the quarter. Joseph Mathias’s Concourse Capital Management also made a $1.5 million investment in the stock during the quarter. The other funds with brand new ADT positions are Matthew Hulsizer’s PEAK6 Capital Management, Jeffrey Talpins’s Element Capital Management, and Steve Cohen’s Point72 Asset Management.
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as ADT Inc. (NYSE:ADT) but similarly valued. We will take a look at Nuance Communications Inc. (NASDAQ:NUAN), Prosperity Bancshares, Inc. (NYSE:PB), 51job, Inc. (NASDAQ:JOBS), and Empire State Realty Trust Inc (NYSE:ESRT). This group of stocks’ market caps are similar to ADT’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| NUAN | 28 | 459833 | -7 |
| PB | 9 | 103636 | 0 |
| JOBS | 12 | 29384 | -1 |
| ESRT | 14 | 161856 | 1 |
| Average | 15.75 | 188677 | -1.75 |
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 $189 million. That figure was $85 million in ADT’s case. Nuance Communications Inc. (NASDAQ:NUAN) is the most popular stock in this table. On the other hand Prosperity Bancshares, Inc. (NYSE:PB) is the least popular one with only 9 bullish hedge fund positions. ADT Inc. (NYSE:ADT) 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 20 most popular stocks among hedge funds returned 6.2% in Q2 through June 19th and outperformed the S&P 500 ETF (SPY) by nearly 3 percentage points. Unfortunately ADT wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on ADT were disappointed as the stock returned -1.9% during the same 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 20 most popular stocks among hedge funds as 13 of these stocks already outperformed the market so far in Q2.
Disclosure: None. This article was originally published at Insider Monkey.
