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Air Products & Chemicals, Inc. (APD) Fell Out Of Favor With Hedge Funds

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With the first-quarter round of 13F filings behind us it is time to take a look at the stocks in which some of the best money managers in the world preferred to invest or sell heading into the second quarter of 2021. One of these stocks was Air Products & Chemicals, Inc. (NYSE:APD).

Air Products & Chemicals, Inc. (NYSE:APD) investors should be aware of a decrease in enthusiasm from smart money in recent months. Air Products & Chemicals, Inc. (NYSE:APD) was in 32 hedge funds' portfolios at the end of the first quarter of 2021. The all time high for this statistic is 77. There were 50 hedge funds in our database with APD holdings at the end of December. Our calculations also showed that APD isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings).

In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey's monthly stock picks returned 206.8% since March 2017 and outperformed the S&P 500 ETFs by more than 115 percentage points (see the details here). That's why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

Ian Wace Marshall Wace
Ian Wace Marshall Wace

Ian Wace of Marshall Wace

At Insider Monkey, we scour multiple sources to uncover 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 EV 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. Keeping this in mind let's take a gander at the recent hedge fund action regarding Air Products & Chemicals, Inc. (NYSE:APD).

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

Heading into the second quarter of 2021, a total of 32 of the hedge funds tracked by Insider Monkey were long this stock, a change of -36% from the previous quarter. By comparison, 41 hedge funds held shares or bullish call options in APD a year ago. So, let's check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

The largest stake in Air Products & Chemicals, Inc. (NYSE:APD) was held by Marshall Wace LLP, which reported holding $117.7 million worth of stock at the end of December. It was followed by Millennium Management with a $90.1 million position. Other investors bullish on the company included AQR Capital Management, Adage Capital Management, and Two Sigma Advisors. In terms of the portfolio weights assigned to each position Bronson Point Partners allocated the biggest weight to Air Products & Chemicals, Inc. (NYSE:APD), around 4.78% of its 13F portfolio. MD Sass is also relatively very bullish on the stock, setting aside 3.11 percent of its 13F equity portfolio to APD.

Seeing as Air Products & Chemicals, Inc. (NYSE:APD) has witnessed bearish sentiment from the aggregate hedge fund industry, it's safe to say that there was a specific group of hedgies that decided to sell off their entire stakes in the first quarter. Intriguingly, Andreas Halvorsen's Viking Global cut the biggest stake of all the hedgies watched by Insider Monkey, worth close to $173.9 million in stock. Aaron Cowen's fund, Suvretta Capital Management, also dropped its stock, about $160.5 million worth. These moves are intriguing to say the least, as aggregate hedge fund interest was cut by 18 funds in the first quarter.

Let's also examine hedge fund activity in other stocks similar to Air Products & Chemicals, Inc. (NYSE:APD). We will take a look at Marsh & McLennan Companies, Inc. (NYSE:MMC), ABB Ltd (NYSE:ABB), Ecolab Inc. (NYSE:ECL), Dominion Energy Inc. (NYSE:D), Autodesk, Inc. (NASDAQ:ADSK), NIO Inc. (NYSE:NIO), and Equinix, Inc. (REIT) (NASDAQ:EQIX). All of these stocks' market caps are closest to APD's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position MMC,37,2143915,-6 ABB,11,563747,3 ECL,42,2403354,-3 D,39,1295937,-8 ADSK,66,3056525,0 NIO,28,1321170,-6 EQIX,41,1546339,-1 Average,37.7,1761570,-3 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 37.7 hedge funds with bullish positions and the average amount invested in these stocks was $1762 million. That figure was $587 million in APD's case. Autodesk, Inc. (NASDAQ:ADSK) is the most popular stock in this table. On the other hand ABB Ltd (NYSE:ABB) is the least popular one with only 11 bullish hedge fund positions. Air Products & Chemicals, Inc. (NYSE:APD) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for APD is 18.6. 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 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 22.8% in 2021 through July 2nd and surpassed the market again by 6 percentage points. Unfortunately APD wasn't nearly as popular as these 5 stocks (hedge fund sentiment was quite bearish); APD investors were disappointed as the stock returned 3.9% since the end of March (through 7/2) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2021.

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