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Insider Monkey has processed numerous 13F filings of hedge funds and successful value investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds' and successful investors' positions as of the end of the third quarter. You can find articles about an individual hedge fund's trades on numerous financial news websites. However, in this article we will take a look at their collective moves over the last 5 years and analyze what the smart money thinks of ADT Inc. (NYSE:ADT) based on that data.
Is ADT a good stock to buy? ADT Inc. (NYSE:ADT) was in 30 hedge funds' portfolios at the end of September. The all time high for this statistic is 21. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. ADT investors should be aware of an increase in support from the world's most elite money managers lately. There were 20 hedge funds in our database with ADT positions at the end of the second quarter. Our calculations also showed that ADT 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.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 66 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 13% through November 17th. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Paul Tudor Jones of Tudor Investment Corp
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, the House passed a landmark bill decriminalizing marijuana. So, we are checking out this under the radar cannabis stock right now. We go through lists like the 15 best blue chip stocks to buy 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. With all of this in mind we're going to take a peek at the fresh hedge fund action regarding ADT Inc. (NYSE:ADT).
Do Hedge Funds Think ADT Is A Good Stock To Buy Now?
Heading into the fourth quarter of 2020, a total of 30 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 50% from one quarter earlier. On the other hand, there were a total of 16 hedge funds with a bullish position in ADT a year ago. With hedge funds' capital changing hands, there exists a few key hedge fund managers who were increasing their holdings meaningfully (or already accumulated large positions).
Of the funds tracked by Insider Monkey, Miller Value Partners, managed by Bill Miller, holds the number one position in ADT Inc. (NYSE:ADT). Miller Value Partners has a $119.8 million position in the stock, comprising 4.3% of its 13F portfolio. The second largest stake is held by Alyeska Investment Group, led by Anand Parekh, holding a $25.3 million position; 0.4% of its 13F portfolio is allocated to the company. Remaining hedge funds and institutional investors that are bullish include Benjamin A. Smith's Laurion Capital Management, Israel Englander's Millennium Management and Cliff Asness's AQR Capital Management. In terms of the portfolio weights assigned to each position Miller Value Partners allocated the biggest weight to ADT Inc. (NYSE:ADT), around 4.3% of its 13F portfolio. Greenhouse Funds is also relatively very bullish on the stock, earmarking 2.17 percent of its 13F equity portfolio to ADT.
As industrywide interest jumped, key money managers have been driving this bullishness. Alyeska Investment Group, managed by Anand Parekh, established the biggest position in ADT Inc. (NYSE:ADT). Alyeska Investment Group had $25.3 million invested in the company at the end of the quarter. Benjamin A. Smith's Laurion Capital Management also made a $16.3 million investment in the stock during the quarter. The other funds with new positions in the stock are OZ Management, Paul Tudor Jones's Tudor Investment Corp, and Josh Donfeld and David Rogers's Castle Hook Partners.
Let's go over hedge fund activity in other stocks - not necessarily in the same industry as ADT Inc. (NYSE:ADT) but similarly valued. We will take a look at Acceleron Pharma Inc (NASDAQ:XLRN), Dunkin Brands Group Inc (NASDAQ:DNKN), LHC Group, Inc. (NASDAQ:LHCG), AECOM (NYSE:ACM), Aramark (NYSE:ARMK), HD Supply Holdings Inc (NASDAQ:HDS), and Carlisle Companies, Inc. (NYSE:CSL). This group of stocks' market valuations resemble ADT's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position XLRN,34,1111306,-14 DNKN,26,246077,-9 LHCG,17,78396,-13 ACM,39,785085,1 ARMK,40,881207,6 HDS,41,1195088,-3 CSL,28,191780,-10 Average,32.1,641277,-6 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 32.1 hedge funds with bullish positions and the average amount invested in these stocks was $641 million. That figure was $268 million in ADT's case. HD Supply Holdings Inc (NASDAQ:HDS) is the most popular stock in this table. On the other hand LHC Group, Inc. (NASDAQ:LHCG) is the least popular one with only 17 bullish hedge fund positions. ADT Inc. (NYSE:ADT) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for ADT is 67.1. 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 33.3% in 2020 through December 18th and surpassed the market again by 16.4 percentage points. Unfortunately ADT wasn't nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); ADT investors were disappointed as the stock returned 3.6% since the end of September (through 12/18) 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.