Were Hedge Funds Right About Piling Into Advanced Micro Devices, Inc. (AMD)?

We at Insider Monkey have gone over 821 13F filings that hedge funds and prominent investors are required to file by the SEC The 13F filings show the funds’ and investors’ portfolio positions as of March 31st, near the height of the coronavirus market crash. We are almost done with the second quarter. Investors decided to bet on the economic recovery and a stock market rebound. S&P 500 Index returned almost 20% this quarter. In this article we look at how hedge funds traded Advanced Micro Devices, Inc. (NASDAQ:AMD) and determine whether the smart money was really smart about this stock.

Is Advanced Micro Devices, Inc. (NASDAQ:AMD) a bargain? Hedge funds were taking a bullish view in Q1. The number of bullish hedge fund bets went up by 9. Our calculations also showed that AMD isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks). AMD was in 62 hedge funds’ portfolios at the end of March. There were 53 hedge funds in our database with AMD positions at the end of the previous quarter.

Video: Watch our video about the top 5 most popular hedge fund stocks.

To most shareholders, hedge funds are perceived as underperforming, outdated financial vehicles of yesteryear. While there are more than 8000 funds in operation today, Our experts hone in on the masters of this group, around 850 funds. These hedge fund managers control the lion’s share of the smart money’s total asset base, and by watching their highest performing investments, Insider Monkey has formulated numerous investment strategies that have historically outpaced the market. Insider Monkey’s flagship short hedge fund strategy beat the S&P 500 short ETFs by around 20 percentage points a year since its inception in March 2017. Our portfolio of short stocks lost 36% since February 2017 (through May 18th) even though the market was up 30% during the same period. We just shared a list of 8 short targets in our latest quarterly update .

At Insider Monkey we scour multiple sources to uncover the next great investment idea. There is a lot of volatility in the markets and this presents amazing investment opportunities from time to time. For example, this trader claims to deliver juiced up returns with one trade a week, so we are checking out his highest conviction idea. A second trader claims to score lucrative profits by utilizing a “weekend trading strategy”, so we look into his strategy’s picks. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We recently recommended several stocks partly inspired by legendary Bill Miller’s investor letter. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 in February after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind we’re going to take a look at the fresh hedge fund action surrounding Advanced Micro Devices, Inc. (NASDAQ:AMD).

What does smart money think about Advanced Micro Devices, Inc. (NASDAQ:AMD)?

Heading into the second quarter of 2020, a total of 62 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 17% from the fourth quarter of 2019. Below, you can check out the change in hedge fund sentiment towards AMD over the last 18 quarters. With hedgies’ positions undergoing their usual ebb and flow, there exists a few notable hedge fund managers who were increasing their stakes significantly (or already accumulated large positions).

When looking at the institutional investors followed by Insider Monkey, Ken Griffin’s Citadel Investment Group has the biggest call position in Advanced Micro Devices, Inc. (NASDAQ:AMD), worth close to $634.9 million, amounting to 0.3% of its total 13F portfolio. The second most bullish fund manager is D E Shaw, managed by D. E. Shaw, which holds a $324.5 million position; the fund has 0.5% of its 13F portfolio invested in the stock. Some other hedge funds and institutional investors that hold long positions contain Ken Fisher’s Fisher Asset Management, Rajiv Jain’s GQG Partners and Brian Ashford-Russell and Tim Woolley’s Polar Capital. In terms of the portfolio weights assigned to each position Kadensa Capital allocated the biggest weight to Advanced Micro Devices, Inc. (NASDAQ:AMD), around 16.06% of its 13F portfolio. Tairen Capital is also relatively very bullish on the stock, dishing out 5.5 percent of its 13F equity portfolio to AMD.

With a general bullishness amongst the heavyweights, some big names were breaking ground themselves. Fisher Asset Management, managed by Ken Fisher, assembled the most valuable position in Advanced Micro Devices, Inc. (NASDAQ:AMD). Fisher Asset Management had $324.4 million invested in the company at the end of the quarter. Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital also initiated a $84 million position during the quarter. The following funds were also among the new AMD investors: John Hurley’s Cavalry Asset Management, Brandon Haley’s Holocene Advisors, and Scott Bessent’s Key Square Capital Management.

Let’s go over 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 Goldman Sachs Group, Inc. (NYSE:GS), U.S. Bancorp (NYSE:USB), Morgan Stanley (NYSE:MS), and Northrop Grumman Corporation (NYSE:NOC). This group of stocks’ market values match AMD’s market value.

View table here if you experience formatting issues.

As you can see these stocks had an average of 60 hedge funds with bullish positions and the average amount invested in these stocks was $3203 million. That figure was $2087 million in AMD’s case. Goldman Sachs Group, Inc. (NYSE:GS) is the most popular stock in this table. On the other hand Northrop Grumman Corporation (NYSE:NOC) is the least popular one with only 45 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. 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 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 13.3% in 2020 through June 25th but beat the market by 16.8 percentage points. Unfortunately AMD wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on AMD were disappointed as the stock returned 14.2% during the same time period 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 so far this year.

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