We hate to say this but, we told you so. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW and predicted a US recession when the S&P 500 Index was trading at the 3150 level. We also told you to short the market and buy long-term Treasury bonds. Our article also called for a total international travel ban. While we were warning you, President Trump minimized the threat and failed to act promptly. As a result of his inaction, we will now experience a deeper recession (see why hell is coming).
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. Although the masses and most of the financial media blame hedge funds for their exorbitant fee structure and disappointing performance, these investors have proved to have great stock picking abilities over the years (that’s why their assets under management continue to swell). We believe hedge fund sentiment should serve as a crucial tool of an individual investor’s stock selection process, as it may offer great insights of how the brightest minds of the finance industry feel about specific stocks. After all, these people have access to smartest analysts and expensive data/information sources that individual investors can’t match. So should one consider investing in Advanced Micro Devices, Inc. (NASDAQ:AMD)? The smart money sentiment can provide an answer to this question.
Is Advanced Micro Devices, Inc. (NASDAQ:AMD) the right pick for your portfolio? Investors who are in the know are selling. The number of long hedge fund bets were cut by 6 recently. Our calculations also showed that AMD isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of this article for Q3 rankings). AMD was in 53 hedge funds’ portfolios at the end of the fourth quarter of 2019. There were 59 hedge funds in our database with AMD holdings at the end of the previous quarter.
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 41 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 35.3% through March 3rd. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
John Overdeck of Two Sigma Advisors
Now we’re going to review the fresh hedge fund action encompassing Advanced Micro Devices, Inc. (NASDAQ:AMD).
Hedge fund activity in Advanced Micro Devices, Inc. (NASDAQ:AMD)
Heading into the first quarter of 2020, a total of 53 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -10% from the third quarter of 2019. The graph below displays the number of hedge funds with bullish position in AMD over the last 18 quarters. With the smart money’s sentiment swirling, there exists an “upper tier” of key hedge fund managers who were boosting their stakes substantially (or already accumulated large positions).
More specifically, Citadel Investment Group was the largest shareholder of Advanced Micro Devices, Inc. (NASDAQ:AMD), with a stake worth $463.7 million reported as of the end of September. Trailing Citadel Investment Group was D E Shaw, which amassed a stake valued at $278.4 million. Renaissance Technologies, GQG Partners, and Polar 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 Atreides Management allocated the biggest weight to Advanced Micro Devices, Inc. (NASDAQ:AMD), around 5.73% of its 13F portfolio. KCL Capital is also relatively very bullish on the stock, earmarking 4.25 percent of its 13F equity portfolio to AMD.
Because Advanced Micro Devices, Inc. (NASDAQ:AMD) has witnessed a decline in interest from the aggregate hedge fund industry, we can see that there lies a certain “tier” of hedgies that decided to sell off their positions entirely in the third quarter. It’s worth mentioning that Ken Griffin’s Citadel Investment Group sold off the largest stake of the 750 funds monitored by Insider Monkey, totaling an estimated $181.9 million in stock, and Kenneth Tropin’s Graham Capital Management was right behind this move, as the fund said goodbye to about $147.6 million worth. These bearish behaviors are intriguing to say the least, as total hedge fund interest was cut by 6 funds in the third quarter.
Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Advanced Micro Devices, Inc. (NASDAQ:AMD) but similarly valued. These stocks are ServiceNow Inc (NYSE:NOW), General Motors Company (NYSE:GM), Las Vegas Sands Corp. (NYSE:LVS), and America Movil SAB de CV (NYSE:AMX). All of these stocks’ market caps are closest to AMD’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| NOW | 75 | 5035036 | -17 |
| GM | 75 | 6531524 | -1 |
| LVS | 37 | 1256467 | -5 |
| AMX | 17 | 278371 | 6 |
| Average | 51 | 3275350 | -4.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 51 hedge funds with bullish positions and the average amount invested in these stocks was $3275 million. That figure was $1463 million in AMD’s case. ServiceNow Inc (NYSE:NOW) is the most popular stock in this table. On the other hand America Movil SAB de CV (NYSE:AMX) is the least popular one with only 17 bullish hedge fund positions. Advanced Micro Devices, Inc. (NASDAQ:AMD) is not the most popular stock in this group but hedge fund interest is still above average. 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 1.0% in 2020 through May 1st but still beat the market by 12.9 percentage points. Hedge funds were also right about betting on AMD as the stock returned 8.8% in 2020 (through May 1st) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.
