Were Hedge Funds Right About Amphenol Corporation (APH)?

After several tireless days we have finished crunching the numbers from nearly 900 13F filings issued by the elite hedge funds and other investment firms that we track at Insider Monkey, which disclosed those firms’ equity portfolios as of December 31st. The results of that effort will be put on display in this article, as we share valuable insight into the smart money sentiment towards Amphenol Corporation (NYSE:APH).

Is Amphenol Corporation (NYSE:APH) the right pick for your portfolio? The smart money was in a pessimistic mood. The number of bullish hedge fund positions decreased by 8 recently. Amphenol Corporation (NYSE:APH) was in 41 hedge funds’ portfolios at the end of December. The all time high for this statistic is 49. Our calculations also showed that APH isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings). There were 49 hedge funds in our database with APH holdings at the end of September.

So, why do we pay attention to hedge fund sentiment before making any investment decisions? Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 124 percentage points since March 2017 (see the details here). We have been able to outperform the passive index funds by tracking the moves of corporate insiders and hedge funds, and we believe small investors can benefit a lot from reading hedge fund investor letters and 13F filings.

Peter Rathjens of Arrowstreet Capital

At Insider Monkey we leave no stone unturned when looking for 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 best hydrogen fuel cell 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. Now we’re going to take a glance at the latest hedge fund action encompassing Amphenol Corporation (NYSE:APH).

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

At fourth quarter’s end, a total of 41 of the hedge funds tracked by Insider Monkey were long this stock, a change of -16% from the third quarter of 2020. Below, you can check out the change in hedge fund sentiment towards APH over the last 22 quarters. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

More specifically, Select Equity Group was the largest shareholder of Amphenol Corporation (NYSE:APH), with a stake worth $598.8 million reported as of the end of December. Trailing Select Equity Group was Woodline Partners, which amassed a stake valued at $95.2 million. Arrowstreet Capital, Adage Capital Management, and AQR Capital Management 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 3.61% of its 13F portfolio. Fundsmith Long/Short Fund is also relatively very bullish on the stock, earmarking 3.17 percent of its 13F equity portfolio to APH.

Seeing as Amphenol Corporation (NYSE:APH) has faced declining sentiment from the entirety of the hedge funds we track, it’s safe to say that there lies a certain “tier” of fund managers who sold off their full holdings by the end of the fourth quarter. Interestingly, Aaron Cowen’s Suvretta Capital Management dropped the largest investment of all the hedgies monitored by Insider Monkey, valued at about $99.8 million in stock. Steve Cohen’s fund, Point72 Asset Management, also sold off its stock, about $35.9 million worth. These bearish behaviors are interesting, as aggregate hedge fund interest fell by 8 funds by the end of the fourth quarter.

Let’s check out hedge fund activity in other stocks similar to Amphenol Corporation (NYSE:APH). We will take a look at Digital Realty Trust, Inc. (NYSE:DLR), Chipotle Mexican Grill, Inc. (NYSE:CMG), BCE Inc. (NYSE:BCE), TC Energy Corporation (NYSE:TRP), Canadian Imperial Bank of Commerce (NYSE:CM), Cadence Design Systems Inc (NASDAQ:CDNS), and Liberty Broadband Corp (NASDAQ:LBRDK). 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 30.7 hedge funds with bullish positions and the average amount invested in these stocks was $1845 million. That figure was $1049 million in APH’s case. Liberty Broadband Corp (NASDAQ:LBRDK) is the most popular stock in this table. On the other hand BCE Inc. (NYSE:BCE) is the least popular one with only 13 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 43. 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 positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 10 most popular stocks among hedge funds returned 90.7% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 35 percentage points. These stocks gained 13.6% in 2021 through April 30th and beat the market again by 1.6 percentage points. Unfortunately APH wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on APH were disappointed as the stock returned 3.2% since the end of December (through 4/30) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as many of these stocks already outperformed the market since 2019.

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