Was The Smart Money Right About Amphenol Corporation (APH)?

Our extensive research has shown that imitating the smart money can generate significant returns for retail investors, which is why we track nearly 823 active prominent money managers and analyze their quarterly 13F filings. The stocks that are heavily bought by hedge funds historically outperformed the market, though there is no shortage of high profile failures like hedge funds’ 2018 losses in Facebook and Apple. Let’s take a closer look at what the funds we track think about Amphenol Corporation (NYSE:APH) in this article.

Hedge fund interest in Amphenol Corporation (NYSE:APH) shares was flat at the end of last quarter. This is usually a negative indicator. Our calculations also showed that APH 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). At the end of this article we will also compare APH to other stocks including T. Rowe Price Group, Inc. (NASDAQ:TROW), IDEXX Laboratories, Inc. (NASDAQ:IDXX), and Alcon Inc. (NYSE:ALC) to get a better sense of its popularity.

Video: 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 was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 56 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 34% through August 17th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Ian Wace of Marshall Wace

At Insider Monkey we scour multiple sources to uncover the next great investment idea. Hedge fund sentiment towards Tesla reached its all time high at the end of 2019 and Tesla shares more than quadrupled this year. We are trying to identify other EV revolution winners, so we are checking out this under-the-radar lithium stock. We go through lists like the 10 best artificial intelligence stocks to pick the best growth 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. Keeping this in mind let’s view the latest hedge fund action regarding Amphenol Corporation (NYSE:APH).

What have hedge funds been doing with Amphenol Corporation (NYSE:APH)?

At the end of the second quarter, a total of 42 of the hedge funds tracked by Insider Monkey were long this stock, a change of 0% from the previous quarter. The graph below displays the number of hedge funds with bullish position in APH over the last 20 quarters. With hedgies’ positions undergoing their usual ebb and flow, there exists an “upper tier” of key hedge fund managers who were adding to their holdings substantially (or already accumulated large positions).

More specifically, Select Equity Group was the largest shareholder of Amphenol Corporation (NYSE:APH), with a stake worth $498.3 million reported as of the end of September. Trailing Select Equity Group was Adage Capital Management, which amassed a stake valued at $91.8 million. Suvretta Capital Management, Woodline Partners, and Arrowstreet 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 Ayrshire Capital Management allocated the biggest weight to Amphenol Corporation (NYSE:APH), around 3.39% of its 13F portfolio. Select Equity Group is also relatively very bullish on the stock, earmarking 2.86 percent of its 13F equity portfolio to APH.

Since Amphenol Corporation (NYSE:APH) has experienced bearish sentiment from the aggregate hedge fund industry, it’s safe to say that there is a sect of funds that decided to sell off their entire stakes in the second quarter. It’s worth mentioning that Anand Parekh’s Alyeska Investment Group cut the largest position of all the hedgies monitored by Insider Monkey, totaling an estimated $16.9 million in stock, and Jinghua Yan’s TwinBeech Capital was right behind this move, as the fund dumped about $1.4 million worth. These bearish behaviors are interesting, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Amphenol Corporation (NYSE:APH) but similarly valued. These stocks are T. Rowe Price Group, Inc. (NASDAQ:TROW), IDEXX Laboratories, Inc. (NASDAQ:IDXX), Alcon Inc. (NYSE:ALC), CoStar Group Inc (NASDAQ:CSGP), MSCI Inc (NYSE:MSCI), Marriott International Inc (NASDAQ:MAR), and ResMed Inc. (NYSE:RMD). This group of stocks’ market valuations match APH’s market valuation.

View table here if you experience formatting issues.

As you can see these stocks had an average of 37.4 hedge funds with bullish positions and the average amount invested in these stocks was $960 million. That figure was $1013 million in APH’s case. CoStar Group Inc (NASDAQ:CSGP) is the most popular stock in this table. On the other hand Alcon Inc. (NYSE:ALC) is the least popular one with only 21 bullish hedge fund positions. Amphenol Corporation (NYSE:APH) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for APH is 71.2. 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 30% in 2020 through October 23rd and still beat the market by 21 percentage points. Hedge funds were also right about betting on APH as the stock returned 25.3% since the end of Q2 (through 10/23) and outperformed the market. Hedge funds were rewarded for their relative bullishness.

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