We know that hedge funds generate strong, risk-adjusted returns over the long run, therefore imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, smart money investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn’t mean that they don’t have occasional colossal losses; they do (like Peltz’s recent General Electric losses). However, it is still good idea to keep an eye on hedge fund activity. With this in mind, as the current round of 13F filings has just ended, let’s examine the smart money sentiment towards Archer Daniels Midland Company (NYSE:ADM).
Archer Daniels Midland Company (NYSE:ADM) was in 32 hedge funds’ portfolios at the end of the third quarter of 2018. ADM has experienced an increase in enthusiasm from smart money recently. There were 21 hedge funds in our database with ADM holdings at the end of the previous quarter. Our calculations also showed that ADM isn’t among the 30 most popular stocks among hedge funds.
To the average investor there are numerous signals stock market investors can use to grade publicly traded companies. A couple of the most underrated signals are hedge fund and insider trading moves. We have shown that, historically, those who follow the best picks of the elite investment managers can trounce their index-focused peers by a superb amount (see the details here).
Let’s go over the new hedge fund action surrounding Archer Daniels Midland Company (NYSE:ADM).
How have hedgies been trading Archer Daniels Midland Company (NYSE:ADM)?
At the end of the third quarter, a total of 32 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 52% from the previous quarter. By comparison, 20 hedge funds held shares or bullish call options in ADM heading into this year. With hedge funds’ capital changing hands, there exists a few notable hedge fund managers who were increasing their holdings considerably (or already accumulated large positions).
The largest stake in Archer Daniels Midland Company (NYSE:ADM) was held by AQR Capital Management, which reported holding $174.1 million worth of stock at the end of September. It was followed by Millennium Management with a $161.2 million position. Other investors bullish on the company included Markel Gayner Asset Management, Carlson Capital, and Gotham Asset Management.
With a general bullishness amongst the heavyweights, key money managers were leading the bulls’ herd. Renaissance Technologies, managed by Jim Simons, created the biggest position in Archer Daniels Midland Company (NYSE:ADM). Renaissance Technologies had $42.2 million invested in the company at the end of the quarter. George Soros’s Soros Fund Management also made a $36.2 million investment in the stock during the quarter. The other funds with brand new ADM positions are Jeffrey Talpins’s Element Capital Management, Sander Gerber’s Hudson Bay Capital Management, and Ilya Boroditsky’s Precision Path Capital.
Let’s now take a look at hedge fund activity in other stocks similar to Archer Daniels Midland Company (NYSE:ADM). We will take a look at Sirius XM Holdings Inc (NASDAQ:SIRI), O’Reilly Automotive Inc (NASDAQ:ORLY), ONEOK, Inc. (NYSE:OKE), and Chunghwa Telecom Co., Ltd (NYSE:CHT). This group of stocks’ market values match ADM’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| SIRI | 24 | 1277620 | -2 |
| ORLY | 43 | 2035471 | 3 |
| OKE | 31 | 517916 | 6 |
| CHT | 4 | 116137 | -1 |
| Average | 25.5 | 986786 | 1.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 25.5 hedge funds with bullish positions and the average amount invested in these stocks was $986.79 billion. That figure was $772 million in ADM’s case. O’Reilly Automotive Inc (NASDAQ:ORLY) is the most popular stock in this table. On the other hand Chunghwa Telecom Co., Ltd (NYSE:CHT) is the least popular one with only 4 bullish hedge fund positions. Archer Daniels Midland Company (NYSE:ADM) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. In this regard ORLY might be a better candidate to consider a long position.
Disclosure: None. This article was originally published at Insider Monkey.
