Is AMETEK, Inc. (NYSE:AME) a good place to invest some of your money right now? We can gain invaluable insight to help us answer that question by studying the investment trends of top investors, who employ world-class Ivy League graduates, who are given immense resources and industry contacts to put their financial expertise to work. The top picks of these firms have historically outperformed the market when we account for known risk factors, making them very valuable investment ideas.
Is AME stock a buy? Investors who are in the know were selling. The number of bullish hedge fund bets were trimmed by 6 in recent months. AMETEK, Inc. (NYSE:AME) was in 31 hedge funds’ portfolios at the end of the fourth quarter of 2020. The all time high for this statistic is 40. Our calculations also showed that AME isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings). There were 37 hedge funds in our database with AME positions at the end of the third quarter.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 124 percentage points since March 2017 (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 13% through November 17th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Lee Ainslie of Maverick Capital
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, we heard that billionaire Peter Thiel is backing this biotech stock. So, we are taking a closer look at this space. We go through lists like the 10 best biotech stocks under $10 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. Keeping this in mind let’s take a peek at the fresh hedge fund action encompassing AMETEK, Inc. (NYSE:AME).
Do Hedge Funds Think AME Is A Good Stock To Buy Now?
At the end of the fourth quarter, a total of 31 of the hedge funds tracked by Insider Monkey were long this stock, a change of -16% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in AME over the last 22 quarters. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Citadel Investment Group was the largest shareholder of AMETEK, Inc. (NYSE:AME), with a stake worth $298.5 million reported as of the end of December. Trailing Citadel Investment Group was D E Shaw, which amassed a stake valued at $182.4 million. GAMCO Investors, Giverny Capital, and Adage Capital Management 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 Giverny Capital allocated the biggest weight to AMETEK, Inc. (NYSE:AME), around 6.61% of its 13F portfolio. Running Oak Capital is also relatively very bullish on the stock, dishing out 1.17 percent of its 13F equity portfolio to AME.
Since AMETEK, Inc. (NYSE:AME) has witnessed declining sentiment from hedge fund managers, it’s safe to say that there was a specific group of hedge funds who sold off their entire stakes heading into Q1. At the top of the heap, John Smith Clark’s Southpoint Capital Advisors dumped the biggest stake of the “upper crust” of funds watched by Insider Monkey, totaling about $59.6 million in stock, and Parvinder Thiara’s Athanor Capital was right behind this move, as the fund said goodbye to about $5 million worth. These bearish behaviors are interesting, as total hedge fund interest fell by 6 funds heading into Q1.
Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as AMETEK, Inc. (NYSE:AME) but similarly valued. These stocks are American Water Works Company, Inc. (NYSE:AWK), Discover Financial Services (NYSE:DFS), Southwest Airlines Co. (NYSE:LUV), Corning Incorporated (NYSE:GLW), Splunk Inc (NASDAQ:SPLK), NatWest Group plc (NYSE:NWG), and Nutrien Ltd. (NYSE:NTR). All of these stocks’ market caps resemble AME’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| AWK | 36 | 958304 | 5 |
| DFS | 43 | 729763 | -4 |
| LUV | 55 | 757534 | 4 |
| GLW | 39 | 334973 | 3 |
| SPLK | 47 | 1036156 | 3 |
| NWG | 3 | 759 | 1 |
| NTR | 25 | 754698 | -1 |
| Average | 35.4 | 653170 | 1.6 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 35.4 hedge funds with bullish positions and the average amount invested in these stocks was $653 million. That figure was $956 million in AME’s case. Southwest Airlines Co. (NYSE:LUV) is the most popular stock in this table. On the other hand NatWest Group plc (NYSE:NWG) is the least popular one with only 3 bullish hedge fund positions. AMETEK, Inc. (NYSE:AME) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for AME is 49.2. 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 12.2% in 2021 through April 12th and beat the market by 1.5 percentage points. A small number of hedge funds were also right about betting on AME, though not to the same extent, as the stock returned 10.1% since the end of Q4 (through April 12th) and outperformed the market.
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Disclosure: None. This article was originally published at Insider Monkey.
