“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 Alta Mesa Resources, Inc. (NASDAQ:AMR).
Alta Mesa Resources, Inc. (NASDAQ:AMR) was in 16 hedge funds’ portfolios at the end of the first quarter of 2019. AMR investors should be aware of a decrease in enthusiasm from smart money recently. There were 19 hedge funds in our database with AMR positions at the end of the previous quarter. Our calculations also showed that amr 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’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the market by 40 percentage points since May 2014 through May 30, 2019 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 30.9% through May 30, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
We’re going to analyze the latest hedge fund action surrounding Alta Mesa Resources, Inc. (NASDAQ:AMR).
Hedge fund activity in Alta Mesa Resources, Inc. (NASDAQ:AMR)
At the end of the first quarter, a total of 16 of the hedge funds tracked by Insider Monkey were long this stock, a change of -16% from the fourth quarter of 2018. Below, you can check out the change in hedge fund sentiment towards AMR over the last 15 quarters. With hedge funds’ positions undergoing their usual ebb and flow, there exists an “upper tier” of noteworthy hedge fund managers who were upping their stakes considerably (or already accumulated large positions).
More specifically, HPS Investment Partners was the largest shareholder of Alta Mesa Resources, Inc. (NASDAQ:AMR), with a stake worth $8.6 million reported as of the end of March. Trailing HPS Investment Partners was Orbis Investment Management, which amassed a stake valued at $6.6 million. Luminus Management, Fir Tree, and Angelo Gordon & Co were also very fond of the stock, giving the stock large weights in their portfolios.
Due to the fact that Alta Mesa Resources, Inc. (NASDAQ:AMR) has experienced bearish sentiment from the aggregate hedge fund industry, logic holds that there were a few hedge funds that slashed their entire stakes last quarter. Interestingly, Steve Cohen’s Point72 Asset Management dumped the biggest investment of the 700 funds watched by Insider Monkey, valued at about $6.7 million in stock, and Anand Parekh’s Alyeska Investment Group was right behind this move, as the fund said goodbye to about $2.5 million worth. These bearish behaviors are intriguing to say the least, as total hedge fund interest was cut by 3 funds last quarter.
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Alta Mesa Resources, Inc. (NASDAQ:AMR) but similarly valued. These stocks are PFSweb, Inc. (NASDAQ:PFSW), Volt Information Sciences, Inc. (NYSE:VISI), Coda Octopus Group, Inc. (NASDAQ:CODA), and CM Finance Inc (NASDAQ:CMFN). This group of stocks’ market valuations are similar to AMR’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| PFSW | 5 | 9561 | -1 |
| VISI | 5 | 5573 | 2 |
| CODA | 3 | 826 | 2 |
| CMFN | 2 | 29978 | -1 |
| Average | 3.75 | 11485 | 0.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 3.75 hedge funds with bullish positions and the average amount invested in these stocks was $11 million. That figure was $19 million in AMR’s case. PFSweb, Inc. (NASDAQ:PFSW) is the most popular stock in this table. On the other hand CM Finance Inc (NASDAQ:CMFN) is the least popular one with only 2 bullish hedge fund positions. Compared to these stocks Alta Mesa Resources, Inc. (NASDAQ:AMR) is more popular among hedge funds. 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 AMR wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on AMR were disappointed as the stock returned -34% 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 in Q2.
Disclosure: None. This article was originally published at Insider Monkey.
