Hedge fund managers like David Einhorn, Bill Ackman, or Carl Icahn became billionaires through reaping large profits for their investors, which is why piggybacking their stock picks may provide us with significant returns as well. Many hedge funds, like Paul Singer’s Elliott Management, are pretty secretive, but we can still get some insights by analyzing their quarterly 13F filings. One of the most fertile grounds for large abnormal returns is hedge funds’ most popular small-cap picks, which are not so widely followed and often trade at a discount to their intrinsic value. In this article we will check out hedge fund activity in another small-cap stock: American Woodmark Corporation (NASDAQ:AMWD).
American Woodmark Corporation (NASDAQ:AMWD) investors should pay attention to an increase in hedge fund sentiment of late. Our calculations also showed that AMWD isn’t among the 30 most popular stocks among hedge funds.
Why do we pay any attention at all to hedge fund sentiment? 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 take a peek at the recent hedge fund action regarding American Woodmark Corporation (NASDAQ:AMWD).
How have hedgies been trading American Woodmark Corporation (NASDAQ:AMWD)?
At the end of the first quarter, a total of 12 of the hedge funds tracked by Insider Monkey were long this stock, a change of 9% from the fourth quarter of 2018. On the other hand, there were a total of 12 hedge funds with a bullish position in AMWD a year ago. With hedgies’ capital changing hands, there exists an “upper tier” of key hedge fund managers who were boosting their stakes considerably (or already accumulated large positions).
More specifically, Islet Management was the largest shareholder of American Woodmark Corporation (NASDAQ:AMWD), with a stake worth $12.9 million reported as of the end of March. Trailing Islet Management was Driehaus Capital, which amassed a stake valued at $11.6 million. Royce & Associates, Point72 Asset Management, and Citadel Investment Group were also very fond of the stock, giving the stock large weights in their portfolios.
As aggregate interest increased, key money managers have been driving this bullishness. Driehaus Capital, managed by Richard Driehaus, established the most valuable position in American Woodmark Corporation (NASDAQ:AMWD). Driehaus Capital had $11.6 million invested in the company at the end of the quarter. Steve Cohen’s Point72 Asset Management also initiated a $7.9 million position during the quarter. The following funds were also among the new AMWD investors: Matthew Hulsizer’s PEAK6 Capital Management, Joel Greenblatt’s Gotham Asset Management, and Brandon Haley’s Holocene Advisors.
Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as American Woodmark Corporation (NASDAQ:AMWD) but similarly valued. These stocks are Franks International NV (NYSE:FI), IMAX Corporation (NYSE:IMAX), Central Puerto S.A. (NYSE:CEPU), and Aimmune Therapeutics Inc (NASDAQ:AIMT). This group of stocks’ market values are similar to AMWD’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| FI | 12 | 24352 | 0 |
| IMAX | 15 | 40733 | 1 |
| CEPU | 12 | 39045 | 4 |
| AIMT | 15 | 202754 | -1 |
| Average | 13.5 | 76721 | 1 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 13.5 hedge funds with bullish positions and the average amount invested in these stocks was $77 million. That figure was $57 million in AMWD’s case. IMAX Corporation (NYSE:IMAX) is the most popular stock in this table. On the other hand Franks International NV (NYSE:FI) is the least popular one with only 12 bullish hedge fund positions. Compared to these stocks American Woodmark Corporation (NASDAQ:AMWD) is even less popular than FI. Hedge funds dodged a bullet by taking a bearish stance towards AMWD. Our calculations showed that the top 20 most popular hedge fund stocks returned 6.2% in Q2 through June 19th and outperformed the S&P 500 ETF (SPY) by nearly 3 percentage points. Unfortunately AMWD wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); AMWD investors were disappointed as the stock returned -4.8% during the same time frame 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 the second quarter.
Disclosure: None. This article was originally published at Insider Monkey.
