Was The Smart Money Right About AECOM (ACM)?

Keeping this in mind, let’s analyze whether AECOM (NYSE:ACM) is a good investment right now by following the lead of some of the best investors in the world and piggybacking their ideas. There’s no better way to get these firms’ immense resources and analytical capabilities working for us than to follow their lead into their best ideas. While not all of these picks will be winners, our research shows that these picks historically outperformed the market when we factor in known risk factors.

AECOM (NYSE:ACM) investors should pay attention to a decrease in hedge fund interest recently. AECOM (NYSE:ACM) was in 38 hedge funds’ portfolios at the end of June. The all time high for this statistics is 39. There were 39 hedge funds in our database with ACM positions at the end of the first quarter. Our calculations also showed that ACM isn’t among the 30 most popular stocks among hedge funds (click for Q2 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.

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 101% since March 2017 and outperformed the S&P 500 ETFs by more than 56 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. We go through lists like the 10 most profitable companies in the world to pick the best large-cap stocks to buy. 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 to get excerpts of these letters in your inbox. Now we’re going to take a look at the latest hedge fund action regarding AECOM (NYSE:ACM).

How are hedge funds trading AECOM (NYSE:ACM)?

At second quarter’s end, a total of 38 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -3% from the previous quarter. By comparison, 22 hedge funds held shares or bullish call options in ACM a year ago. With hedge funds’ sentiment swirling, there exists a select group of key hedge fund managers who were boosting their stakes meaningfully (or already accumulated large positions).

The largest stake in AECOM (NYSE:ACM) was held by Starboard Value LP, which reported holding $224.6 million worth of stock at the end of June. It was followed by Renaissance Technologies with a $118.9 million position. Other investors bullish on the company included TIG Advisors, Blue Harbour Group, and Citadel Investment Group. In terms of the portfolio weights assigned to each position Blue Harbour Group allocated the biggest weight to AECOM (NYSE:ACM), around 12.62% of its 13F portfolio. Starboard Value LP is also relatively very bullish on the stock, designating 8 percent of its 13F equity portfolio to ACM.

Judging by the fact that AECOM (NYSE:ACM) has faced a decline in interest from hedge fund managers, it’s safe to say that there was a specific group of hedge funds that slashed their positions entirely in the second quarter. Intriguingly, Zilvinas Mecelis’s Covalis Capital said goodbye to the biggest stake of all the hedgies monitored by Insider Monkey, totaling about $9.7 million in stock. Asad Rahman and Aman Kapadia’s fund, Akaris Global Partners, also said goodbye to its stock, about $8.3 million worth. These transactions are important to note, as total hedge fund interest dropped by 1 funds in the second quarter.

Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as AECOM (NYSE:ACM) but similarly valued. These stocks are Owens Corning (NYSE:OC), Vroom, Inc. (NASDAQ:VRM), ANGI Homeservices Inc (NASDAQ:ANGI), Manhattan Associates, Inc. (NASDAQ:MANH), Canopy Growth Corporation (NYSE:CGC), Post Holdings Inc (NYSE:POST), and Five Below Inc (NASDAQ:FIVE). This group of stocks’ market caps are similar to ACM’s market cap.

View table here if you experience formatting issues.

As you can see these stocks had an average of 30.7 hedge funds with bullish positions and the average amount invested in these stocks was $583 million. That figure was $664 million in ACM’s case. ANGI Homeservices Inc (NASDAQ:ANGI) is the most popular stock in this table. On the other hand Canopy Growth Corporation (NYSE:CGC) is the least popular one with only 11 bullish hedge fund positions. AECOM (NYSE:ACM) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for ACM is 69.7. 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 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 23% in 2020 through October 30th and still beat the market by 20.1 percentage points. Hedge funds were also right about betting on ACM as the stock returned 19.3% since the end of Q2 (through 10/30) and outperformed the market. Hedge funds were rewarded for their relative bullishness.

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