In this article you are going to find out whether hedge funds think AMETEK, Inc. (NYSE:AME) is a good investment right now. We like to check what the smart money thinks first before doing extensive research on a given stock. Although there have been several high profile failed hedge fund picks, the consensus picks among hedge fund investors have historically outperformed the market after adjusting for known risk attributes. It’s not surprising given that hedge funds have access to better information and more resources to predict the winners in the stock market.
Is AMETEK, Inc. (NYSE:AME) the right pick for your portfolio? Hedge funds are turning bullish. The number of long hedge fund bets rose by 1 lately. Our calculations also showed that AME isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks).
Video: Watch our video about the top 5 most popular hedge fund stocks.
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 51 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 36% through May 18th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Philip Hempleman of Ardsley Partners
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, 2020’s unprecedented market conditions provide us with the highest number of trading opportunities in a decade. So we are checking out trades like this one. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind we’re going to check out the fresh hedge fund action surrounding AMETEK, Inc. (NYSE:AME).
How are hedge funds trading AMETEK, Inc. (NYSE:AME)?
At Q1’s end, a total of 33 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 3% from the fourth quarter of 2019. The graph below displays the number of hedge funds with bullish position in AME over the last 18 quarters. With the smart money’s sentiment swirling, there exists a select group of key hedge fund managers who were increasing their holdings considerably (or already accumulated large positions).
More specifically, Citadel Investment Group was the largest shareholder of AMETEK, Inc. (NYSE:AME), with a stake worth $199.8 million reported as of the end of September. Trailing Citadel Investment Group was GAMCO Investors, which amassed a stake valued at $90.2 million. D E Shaw, Adage Capital Management, and Giverny 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 Giverny Capital allocated the biggest weight to AMETEK, Inc. (NYSE:AME), around 6.67% of its 13F portfolio. Jade Capital Advisors is also relatively very bullish on the stock, designating 2.5 percent of its 13F equity portfolio to AME.
As industrywide interest jumped, key hedge funds were breaking ground themselves. Point72 Asset Management, managed by Steve Cohen, established the most valuable position in AMETEK, Inc. (NYSE:AME). Point72 Asset Management had $25.3 million invested in the company at the end of the quarter. Robert Vincent McHugh’s Jade Capital Advisors also made a $2 million investment in the stock during the quarter. The other funds with brand new AME positions are Philip Hempleman’s Ardsley Partners, Paul Tudor Jones’s Tudor Investment Corp, and John Overdeck and David Siegel’s Two Sigma Advisors.
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as AMETEK, Inc. (NYSE:AME) but similarly valued. We will take a look at The Royal Bank of Scotland Group plc (NYSE:RBS), Palo Alto Networks Inc (NYSE:PANW), Rogers Communications Inc. (NYSE:RCI), and Microchip Technology Incorporated (NASDAQ:MCHP). This group of stocks’ market valuations are similar to AME’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| RBS | 5 | 13271 | 0 |
| PANW | 47 | 2721801 | 0 |
| RCI | 16 | 237258 | 3 |
| MCHP | 38 | 751411 | -8 |
| Average | 26.5 | 930935 | -1.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 26.5 hedge funds with bullish positions and the average amount invested in these stocks was $931 million. That figure was $640 million in AME’s case. Palo Alto Networks Inc (NYSE:PANW) is the most popular stock in this table. On the other hand The Royal Bank of Scotland Group plc (NYSE:RBS) is the least popular one with only 5 bullish hedge fund positions. AMETEK, Inc. (NYSE:AME) is not the most popular stock in this group but hedge fund interest is still above average. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 8.3% in 2020 through the end of May but still beat the market by 13.2 percentage points. Hedge funds were also right about betting on AME as the stock returned 27.3% in Q2 (through the end of May) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
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Disclosure: None. This article was originally published at Insider Monkey.
