Should I Avoid Ampco-Pittsburgh Corp. (AP)?

The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. Insider Monkey finished processing 866 13F filings submitted by hedge funds and prominent investors. These filings show these funds’ portfolio positions as of March 31st, 2020. What do these smart investors think about Ampco-Pittsburgh Corp. (NYSE:AP)?

Ampco-Pittsburgh Corp. (NYSE:AP) investors should be aware of a decrease in hedge fund sentiment of late. Ampco-Pittsburgh Corp. (NYSE:AP) was in 4 hedge funds’ portfolios at the end of the first quarter of 2021. The all time high for this statistic is 9. Our calculations also showed that AP isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings).

In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s monthly stock picks returned 206.8% since March 2017 and outperformed the S&P 500 ETFs by more than 115 percentage points (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

Chuck Royce of Royce & Associates

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, an activist hedge fund wants to buy this $28 biotech stock for $50. So, we recommended a long position to our monthly premium newsletter subscribers. We go through lists like the 10 best battery stocks 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 let’s analyze the recent hedge fund action surrounding Ampco-Pittsburgh Corp. (NYSE:AP).

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

Heading into the second quarter of 2021, a total of 4 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -20% from the fourth quarter of 2020. By comparison, 3 hedge funds held shares or bullish call options in AP a year ago. With hedge funds’ capital changing hands, there exists an “upper tier” of key hedge fund managers who were boosting their stakes considerably (or already accumulated large positions).

According to Insider Monkey’s hedge fund database, GAMCO Investors, managed by Mario Gabelli, holds the number one position in Ampco-Pittsburgh Corp. (NYSE:AP). GAMCO Investors has a $13.5 million position in the stock, comprising 0.1% of its 13F portfolio. The second most bullish fund manager is Renaissance Technologies, which holds a $4.4 million position; less than 0.1%% of its 13F portfolio is allocated to the stock. Some other professional money managers with similar optimism consist of Mario Gabelli’s GAMCO Investors, Chuck Royce’s Royce & Associates and Israel Englander’s Millennium Management. In terms of the portfolio weights assigned to each position GAMCO Investors allocated the biggest weight to Ampco-Pittsburgh Corp. (NYSE:AP), around 0.12% of its 13F portfolio. GAMCO Investors is also relatively very bullish on the stock, dishing out 0.02 percent of its 13F equity portfolio to AP.

We view hedge fund activity in the stock unfavorable, but in this case there was only a single hedge fund selling its entire position: Invenomic Capital Management. One hedge fund selling its entire position doesn’t always imply a bearish intent. Theoretically a hedge fund may decide to sell a promising position in order to invest the proceeds in a more promising idea. However, we don’t think this is the case in this case because none of the 750+ hedge funds tracked by Insider Monkey identified AP as a viable investment and initiated a position in the stock.

Let’s now take a look at hedge fund activity in other stocks similar to Ampco-Pittsburgh Corp. (NYSE:AP). These stocks are Clipper Realty Inc. (NYSE:CLPR), Natural Gas Services Group, Inc. (NYSE:NGS), Goodrich Petroleum Corporation (NYSE:GDP), Siebert Financial Corp. (NASDAQ:SIEB), IEC Electronics Corp. (NASDAQ:IEC), Aptevo Therapeutics Inc. (NASDAQ:APVO), and TRACON Pharmaceuticals Inc (NASDAQ:TCON). All of these stocks’ market caps are closest to AP’s market cap.

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As you can see these stocks had an average of 5.1 hedge funds with bullish positions and the average amount invested in these stocks was $26 million. That figure was $21 million in AP’s case. Aptevo Therapeutics Inc. (NASDAQ:APVO) is the most popular stock in this table. On the other hand IEC Electronics Corp. (NASDAQ:IEC) is the least popular one with only 1 bullish hedge fund positions. Ampco-Pittsburgh Corp. (NYSE:AP) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for AP is 38.8. 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. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. 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 gained 17.2% in 2021 through June 11th and surpassed the market again by 3.3 percentage points. Unfortunately AP wasn’t nearly as popular as these 5 stocks (hedge fund sentiment was quite bearish); AP investors were disappointed as the stock returned -0.6% since the end of March (through 6/11) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2021.

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