How do we determine whether A. O. Smith Corporation (NYSE:AOS) makes for a good investment at the moment? We analyze the sentiment of a select group of the very best investors in the world, who spend immense amounts of time and resources studying companies. They may not always be right (no one is), but data shows that their consensus long positions have historically outperformed the market when we adjust for known risk factors.
A. O. Smith Corporation (NYSE:AOS) was in 33 hedge funds’ portfolios at the end of the third quarter of 2018. AOS investors should pay attention to an increase in hedge fund sentiment in recent months. There were 21 hedge funds in our database with AOS holdings at the end of the previous quarter. Our calculations also showed that aos 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 6.3% year to date (through December 3rd) and outperformed the market even though it draws its stock picks among small-cap stocks. This strategy also outperformed the market by 18 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.
We’re going to go over the recent hedge fund action encompassing A. O. Smith Corporation (NYSE:AOS).
How have hedgies been trading A. O. Smith Corporation (NYSE:AOS)?
Heading into the fourth quarter of 2018, a total of 33 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 57% from the previous quarter. By comparison, 21 hedge funds held shares or bullish call options in AOS heading into this year. With hedge funds’ sentiment swirling, there exists a few key hedge fund managers who were increasing their stakes significantly (or already accumulated large positions).
The largest stake in A. O. Smith Corporation (NYSE:AOS) was held by Select Equity Group, which reported holding $206.6 million worth of stock at the end of September. It was followed by Impax Asset Management with a $150.8 million position. Other investors bullish on the company included Point72 Asset Management, Millennium Management, and Echo Street Capital Management.
As aggregate interest increased, specific money managers have jumped into A. O. Smith Corporation (NYSE:AOS) headfirst. Point72 Asset Management, managed by Steve Cohen, created the biggest position in A. O. Smith Corporation (NYSE:AOS). Point72 Asset Management had $110.6 million invested in the company at the end of the quarter. Paul Marshall and Ian Wace’s Marshall Wace LLP also initiated a $31.8 million position during the quarter. The other funds with brand new AOS positions are John Overdeck and David Siegel’s Two Sigma Advisors, Steve Cohen’s Point72 Asset Management, and Israel Englander’s Millennium Management.
Let’s now review hedge fund activity in other stocks similar to A. O. Smith Corporation (NYSE:AOS). We will take a look at West Pharmaceutical Services Inc. (NYSE:WST), Autohome Inc (NYSE:ATHM), NiSource Inc. (NYSE:NI), and Enel Americas S.A. (NYSE:ENIA). This group of stocks’ market valuations match AOS’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| WST | 17 | 252641 | 4 |
| ATHM | 18 | 615842 | 0 |
| NI | 13 | 626278 | 0 |
| ENIA | 11 | 60929 | 0 |
| Average | 14.75 | 388923 | 1 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 14.75 hedge funds with bullish positions and the average amount invested in these stocks was $389 million. That figure was $739 million in AOS’s case. Autohome Inc (NYSE:ATHM) is the most popular stock in this table. On the other hand Enel Americas S.A. (NYSE:ENIA) is the least popular one with only 11 bullish hedge fund positions. Compared to these stocks A. O. Smith Corporation (NYSE:AOS) is more popular among hedge funds. Considering that hedge funds are fond of this stock in relation to its market cap peers, it may be a good idea to analyze it in detail and potentially include it in your portfolio.
Disclosure: None. This article was originally published at Insider Monkey.
