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In this article you are going to find out whether hedge funds think ABM Industries, Inc. (NYSE:ABM) is a good investment right now. We like to check what the smart money thinks first before doing extensive research on a given stock. Although there have been several high profile failed hedge fund picks, the consensus picks among hedge fund investors have historically outperformed the market after adjusting for known risk attributes. It's not surprising given that hedge funds have access to better information and more resources to predict the winners in the stock market.
Is ABM a good stock to buy now? ABM Industries, Inc. (NYSE:ABM) investors should be aware of a decrease in hedge fund interest of late. ABM Industries, Inc. (NYSE:ABM) was in 18 hedge funds' portfolios at the end of September. The all time high for this statistic is 21. Our calculations also showed that ABM isn't among the 30 most popular stocks among hedge funds (click for Q3 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.
To most stock holders, hedge funds are viewed as unimportant, old investment tools of years past. While there are more than 8000 funds with their doors open today, Our researchers look at the top tier of this group, about 850 funds. These money managers manage the lion's share of all hedge funds' total asset base, and by observing their highest performing stock picks, Insider Monkey has discovered various investment strategies that have historically outperformed the S&P 500 index. Insider Monkey's flagship short hedge fund strategy outpaced the S&P 500 short ETFs by around 20 percentage points per annum since its inception in March 2017. Our portfolio of short stocks lost 13% since February 2017 (through November 17th) even though the market was up 65% during the same period. We just shared a list of 6 short targets in our latest quarterly update .
Ken Griffin of Citadel Investment Group
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 15 best blue chip stocks 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. Now we're going to take a look at the fresh hedge fund action regarding ABM Industries, Inc. (NYSE:ABM).
Do Hedge Funds Think ABM Is A Good Stock To Buy Now?
Heading into the fourth quarter of 2020, a total of 18 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -14% from the second quarter of 2020. By comparison, 14 hedge funds held shares or bullish call options in ABM a year ago. With hedge funds' positions undergoing their usual ebb and flow, there exists a select group of noteworthy hedge fund managers who were boosting their stakes considerably (or already accumulated large positions).
More specifically, Royce & Associates was the largest shareholder of ABM Industries, Inc. (NYSE:ABM), with a stake worth $14.8 million reported as of the end of September. Trailing Royce & Associates was Leonard Green & Partners, which amassed a stake valued at $11 million. Renaissance Technologies, Citadel Investment Group, and ExodusPoint 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 Leonard Green & Partners allocated the biggest weight to ABM Industries, Inc. (NYSE:ABM), around 0.57% of its 13F portfolio. Quantinno Capital is also relatively very bullish on the stock, earmarking 0.29 percent of its 13F equity portfolio to ABM.
Because ABM Industries, Inc. (NYSE:ABM) has faced a decline in interest from the entirety of the hedge funds we track, we can see that there exists a select few fund managers that slashed their entire stakes by the end of the third quarter. At the top of the heap, Peter Rathjens, Bruce Clarke and John Campbell's Arrowstreet Capital dumped the largest position of all the hedgies watched by Insider Monkey, comprising an estimated $7.8 million in stock, and Efrem Kamen's Pura Vida Investments was right behind this move, as the fund dropped about $4.8 million worth. These transactions are intriguing to say the least, as aggregate hedge fund interest was cut by 3 funds by the end of the third quarter.
Let's now take a look at hedge fund activity in other stocks - not necessarily in the same industry as ABM Industries, Inc. (NYSE:ABM) but similarly valued. We will take a look at CarGurus, Inc. (NASDAQ:CARG), Stepan Company (NYSE:SCL), Echostar Corporation (NASDAQ:SATS), Brookfield Business Partners L.P. (NYSE:BBU), Avient Corporation (NYSE:AVNT), Agios Pharmaceuticals Inc (NASDAQ:AGIO), and White Mountains Insurance Group Ltd (NYSE:WTM). This group of stocks' market values match ABM's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position CARG,32,328264,1 SCL,12,46672,-3 SATS,28,346080,-1 BBU,4,4337,1 AVNT,20,221331,-2 AGIO,31,330249,1 WTM,17,115000,6 Average,20.6,198848,0.4 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 20.6 hedge funds with bullish positions and the average amount invested in these stocks was $199 million. That figure was $48 million in ABM's case. CarGurus, Inc. (NASDAQ:CARG) is the most popular stock in this table. On the other hand Brookfield Business Partners L.P. (NYSE:BBU) is the least popular one with only 4 bullish hedge fund positions. ABM Industries, Inc. (NYSE:ABM) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for ABM is 52.7. 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. This is a slightly negative signal and we'd rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 30.7% in 2020 through December 14th and surpassed the market again by 15.8 percentage points. Unfortunately ABM wasn't nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); ABM investors were disappointed as the stock returned 8.8% since the end of September (through 12/14) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.
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Disclosure: None. This article was originally published at Insider Monkey.