Is ADM Stock A Buy or Sell?

With the fourth-quarter round of 13F filings behind us it is time to take a look at the stocks in which some of the best money managers in the world preferred to invest or sell heading into the first quarter of 2021. One of these stocks was Archer Daniels Midland Company (NYSE:ADM).

Is ADM stock a buy? Archer Daniels Midland Company (NYSE:ADM) was in 35 hedge funds’ portfolios at the end of December. The all time high for this statistic is 33. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. ADM has seen an increase in support from the world’s most elite money managers lately. There were 26 hedge funds in our database with ADM holdings at the end of September. Our calculations also showed that ADM isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings).

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 monthly stock picks returned 197% since March 2017 and outperformed the S&P 500 ETFs by more than 124 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

Tom Gayner of Markel Gayner Asset Management

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, the House passed a landmark bill decriminalizing marijuana. So, we are checking out this under the radar cannabis stock right now. We go through lists like the 10 best battery stocks to buy to identify the next stock with 10x upside potential. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our website. Now we’re going to review the fresh hedge fund action regarding Archer Daniels Midland Company (NYSE:ADM).

Do Hedge Funds Think ADM Is A Good Stock To Buy Now?

At the end of the fourth quarter, a total of 35 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 35% from the third quarter of 2020. Below, you can check out the change in hedge fund sentiment towards ADM over the last 22 quarters. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

According to Insider Monkey’s hedge fund database, Ric Dillon’s Diamond Hill Capital has the most valuable position in Archer Daniels Midland Company (NYSE:ADM), worth close to $289.7 million, comprising 1.4% of its total 13F portfolio. The second largest stake is held by Markel Gayner Asset Management, managed by Tom Gayner, which holds a $74.5 million position; the fund has 1.1% of its 13F portfolio invested in the stock. Other hedge funds and institutional investors with similar optimism contain Dmitry Balyasny’s Balyasny Asset Management, Anand Parekh’s Alyeska Investment Group and Cliff Asness’s AQR Capital Management. In terms of the portfolio weights assigned to each position Horseman Capital Management allocated the biggest weight to Archer Daniels Midland Company (NYSE:ADM), around 5.84% of its 13F portfolio. Levin Easterly Partners is also relatively very bullish on the stock, dishing out 4.27 percent of its 13F equity portfolio to ADM.

With a general bullishness amongst the heavyweights, specific money managers were breaking ground themselves. Alyeska Investment Group, managed by Anand Parekh, initiated the most outsized position in Archer Daniels Midland Company (NYSE:ADM). Alyeska Investment Group had $37.4 million invested in the company at the end of the quarter. Ken Griffin’s Citadel Investment Group also initiated a $9.7 million position during the quarter. The following funds were also among the new ADM investors: John Horseman’s Horseman Capital Management, Greg Eisner’s Engineers Gate Manager, and Jinghua Yan’s TwinBeech Capital.

Let’s now review hedge fund activity in other stocks similar to Archer Daniels Midland Company (NYSE:ADM). These stocks are Fastenal Company (NASDAQ:FAST), Simon Property Group, Inc (NYSE:SPG), McKesson Corporation (NYSE:MCK), AMETEK, Inc. (NYSE:AME), American Water Works Company, Inc. (NYSE:AWK), Discover Financial Services (NYSE:DFS), and Southwest Airlines Co. (NYSE:LUV). This group of stocks’ market caps match ADM’s market cap.

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As you can see these stocks had an average of 39.7 hedge funds with bullish positions and the average amount invested in these stocks was $877 million. That figure was $703 million in ADM’s case. Southwest Airlines Co. (NYSE:LUV) is the most popular stock in this table. On the other hand Fastenal Company (NASDAQ:FAST) is the least popular one with only 30 bullish hedge fund positions. Archer Daniels Midland Company (NYSE:ADM) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for ADM is 50. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. Our calculations showed that top 30 most popular stocks among hedge funds returned 81.2% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 26 percentage points. These stocks gained 7.9% in 2021 through April 1st and still beat the market by 0.4 percentage points. A small number of hedge funds were also right about betting on ADM as the stock returned 15.2% since the end of the fourth quarter (through 4/1) and outperformed the market by an even larger margin.

Disclosure: None. This article was originally published at Insider Monkey.