Looking for stocks with high upside potential? Just follow the big players within the hedge fund industry. Why should you do so? Let’s take a brief look at what statistics have to say about hedge funds’ stock picking abilities to illustrate. The Standard and Poor’s 500 Index returned approximately 20% in 2019 (through September 30th). Conversely, hedge funds’ 20 preferred S&P 500 stocks generated a return of 24% during the same period, with the majority of these stock picks outperforming the broader market benchmark. Coincidence? It might happen to be so, but it is unlikely. Our research covering the last 18 years indicates that hedge funds’ consensus stock picks generate superior risk-adjusted returns. That’s why we believe it is wise to check hedge fund activity before you invest your time or your savings on a stock like Atkore International Group Inc. (NYSE:ATKR).
Is Atkore International Group Inc. (NYSE:ATKR) a worthy investment now? The smart money is reducing their bets on the stock. The number of bullish hedge fund positions dropped by 2 recently. Our calculations also showed that ATKR isn’t among the 30 most popular stocks among hedge funds (see the video below).
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research has shown that hedge funds’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the market by 40 percentage points since May 2014 through May 30, 2019 (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 25.7% through September 30, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Unlike former hedge manager, Dr. Steve Sjuggerud, who is convinced Dow will soar past 40000, our long-short investment strategy doesn’t rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. We’re going to take a look at the recent hedge fund action surrounding Atkore International Group Inc. (NYSE:ATKR).
How have hedgies been trading Atkore International Group Inc. (NYSE:ATKR)?
Heading into the third quarter of 2019, a total of 17 of the hedge funds tracked by Insider Monkey were long this stock, a change of -11% from one quarter earlier. On the other hand, there were a total of 21 hedge funds with a bullish position in ATKR a year ago. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, AQR Capital Management was the largest shareholder of Atkore International Group Inc. (NYSE:ATKR), with a stake worth $25.5 million reported as of the end of March. Trailing AQR Capital Management was GLG Partners, which amassed a stake valued at $20.7 million. Arrowstreet Capital, D E Shaw, and Millennium Management were also very fond of the stock, giving the stock large weights in their portfolios.
Since Atkore International Group Inc. (NYSE:ATKR) has faced bearish sentiment from the smart money, it’s safe to say that there exists a select few fund managers that slashed their entire stakes last quarter. At the top of the heap, Minhua Zhang’s Weld Capital Management dumped the largest position of the 750 funds followed by Insider Monkey, comprising about $0.5 million in stock, and Joel Greenblatt’s Gotham Asset Management was right behind this move, as the fund sold off about $0.4 million worth. These moves are interesting, as aggregate hedge fund interest dropped by 2 funds last quarter.
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Atkore International Group Inc. (NYSE:ATKR) but similarly valued. These stocks are Innovative Industrial Properties, Inc. (NYSE:IIPR), Sonos, Inc. (NASDAQ:SONO), Encore Wire Corporation (NASDAQ:WIRE), and Editas Medicine, Inc. (NASDAQ:EDIT). This group of stocks’ market caps match ATKR’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| IIPR | 10 | 24592 | 1 |
| SONO | 21 | 84443 | -1 |
| WIRE | 15 | 48049 | -1 |
| EDIT | 14 | 114839 | -1 |
| Average | 15 | 67981 | -0.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 15 hedge funds with bullish positions and the average amount invested in these stocks was $68 million. That figure was $91 million in ATKR’s case. Sonos, Inc. (NASDAQ:SONO) is the most popular stock in this table. On the other hand Innovative Industrial Properties, Inc. (NYSE:IIPR) is the least popular one with only 10 bullish hedge fund positions. Atkore International Group Inc. (NYSE:ATKR) is not the most popular stock in this group but hedge fund interest is still above average. Our calculations showed that top 20 most popular stocks among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Hedge funds were also right about betting on ATKR as the stock returned 17.3% during the third quarter and outperformed the market. Hedge funds were rewarded for their relative bullishness.
Disclosure: None. This article was originally published at Insider Monkey.
