Is Alpha Metallurgical Resources, Inc. (AMR) A Good Stock To Buy?

The 800+ hedge funds and famous money managers tracked by Insider Monkey have already compiled and submitted their 13F filings for the second quarter, which unveil their equity positions as of June 30th. We went through these filings, fixed typos and other more significant errors and identified the changes in hedge fund portfolios. Our extensive review of these public filings is finally over, so this article is set to reveal the smart money sentiment towards Alpha Metallurgical Resources, Inc. (NYSE:AMR).

Is AMR a good stock to buy? Hedge fund interest in Alpha Metallurgical Resources, Inc. (NYSE:AMR) shares was flat at the end of last quarter. This is usually a negative indicator. Our calculations also showed that AMR isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings). The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Resources Connection, Inc. (NASDAQ:RGP), Willdan Group, Inc. (NASDAQ:WLDN), and Autolus Therapeutics plc (NASDAQ:AUTL) to gather more data points.

So, why do we pay attention to hedge fund sentiment before making any investment decisions? Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 79 percentage points since March 2017 (see the details here). We have been able to outperform the passive index funds by tracking the moves of corporate insiders and hedge funds, and we believe small investors can benefit a lot from reading hedge fund investor letters and 13F filings.

Jeffrey Gendell of Tontine Asset Management

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, plant based food market is expected to explode 100-fold by 2050, so we are checking out this stock pitch. We go through lists like the 10 best growth stocks to buy to pick the next Tesla that will deliver a 10x return. 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 homepage. With all of this in mind we’re going to analyze the new hedge fund action surrounding Alpha Metallurgical Resources, Inc. (NYSE:AMR).

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

At the end of June, a total of 19 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 0% from one quarter earlier. On the other hand, there were a total of 19 hedge funds with a bullish position in AMR a year ago. With hedge funds’ sentiment swirling, there exists a select group of key hedge fund managers who were increasing their stakes considerably (or already accumulated large positions).

More specifically, Alta Fundamental Advisers was the largest shareholder of Alpha Metallurgical Resources, Inc. (NYSE:AMR), with a stake worth $27 million reported as of the end of June. Trailing Alta Fundamental Advisers was Tontine Asset Management, which amassed a stake valued at $21.1 million. Silver Point Capital, Highbridge Capital Management, and Maple Rock Capital were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Alta Fundamental Advisers allocated the biggest weight to Alpha Metallurgical Resources, Inc. (NYSE:AMR), around 14.21% of its 13F portfolio. Alden Global Capital is also relatively very bullish on the stock, designating 2.7 percent of its 13F equity portfolio to AMR.

Seeing as Alpha Metallurgical Resources, Inc. (NYSE:AMR) has witnessed falling interest from the entirety of the hedge funds we track, it’s easy to see that there lies a certain “tier” of fund managers that slashed their positions entirely by the end of the second quarter. It’s worth mentioning that Kenneth Tropin’s Graham Capital Management dropped the biggest position of all the hedgies followed by Insider Monkey, comprising close to $4.6 million in stock. Andy Redleaf’s fund, Whitebox Advisors, also dropped its stock, about $1 million worth. These transactions are interesting, as total hedge fund interest stayed the same (this is a bearish signal in our experience).

Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Alpha Metallurgical Resources, Inc. (NYSE:AMR) but similarly valued. These stocks are Resources Connection, Inc. (NASDAQ:RGP), Willdan Group, Inc. (NASDAQ:WLDN), Autolus Therapeutics plc (NASDAQ:AUTL), TherapeuticsMD Inc (NASDAQ:TXMD), Benefitfocus Inc (NASDAQ:BNFT), Viking Therapeutics, Inc. (NASDAQ:VKTX), and Daily Journal Corporation (NASDAQ:DJCO). This group of stocks’ market caps are closest to AMR’s market cap.

View table here if you experience formatting issues.

As you can see these stocks had an average of 10.6 hedge funds with bullish positions and the average amount invested in these stocks was $43 million. That figure was $126 million in AMR’s case. Benefitfocus Inc (NASDAQ:BNFT) is the most popular stock in this table. On the other hand Daily Journal Corporation (NASDAQ:DJCO) is the least popular one with only 3 bullish hedge fund positions. Compared to these stocks Alpha Metallurgical Resources, Inc. (NYSE:AMR) is more popular among hedge funds. Our overall hedge fund sentiment score for AMR is 72.8. 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 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks returned 24% in 2021 through October 22nd but still managed to beat the market by 1.6 percentage points. Hedge funds were also right about betting on AMR as the stock returned 151.5% since the end of June (through 10/22) and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.

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