Coronavirus is probably the #1 concern in investors' minds right now. It should be. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW. We predicted that a US recession is imminent and US stocks will go down by at least 20% in the next 3-6 months. We also told you to short the market ETFs and buy long-term bonds. Investors who agreed with us and replicated these trades are up double digits whereas the market is down double digits. Our article also called for a total international travel ban to prevent the spread of the coronavirus especially from Europe. We were one step ahead of the markets and the president (see why hell is coming).
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. The Insider Monkey team has completed processing the quarterly 13F filings for the December quarter submitted by the hedge funds and other money managers included in our extensive database. Most hedge fund investors experienced strong gains on the back of a strong market performance, which certainly propelled them to adjust their equity holdings so as to maintain the desired risk profile. As a result, the relevancy of these public filings and their content is indisputable, as they may reveal numerous high-potential stocks. The following article will discuss the smart money sentiment towards Altra Industrial Motion Corp. (NASDAQ:AIMC).
Altra Industrial Motion Corp. (NASDAQ:AIMC) shares haven't seen a lot of action during the fourth quarter. Overall, hedge fund sentiment was unchanged. The stock was in 15 hedge funds' portfolios at the end of the fourth quarter of 2019. At the end of this article we will also compare AIMC to other stocks including Holly Energy Partners, L.P. (NYSE:HEP), Urban Edge Properties (NYSE:UE), and Worthington Industries, Inc. (NYSE:WOR) to get a better sense of its popularity.
According to most shareholders, hedge funds are assumed to be slow, old financial tools of yesteryear. While there are more than 8000 funds in operation at present, Our researchers look at the bigwigs of this group, around 850 funds. These investment experts preside over the majority of all hedge funds' total capital, and by monitoring their highest performing stock picks, Insider Monkey has identified various investment strategies that have historically defeated 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 35.3% since February 2017 (through March 3rd) even though the market was up more than 35% during the same period. We just shared a list of 7 short targets in our latest quarterly update .
[caption id="attachment_728785" align="aligncenter" width="400"] Jeffrey Gates of Gates Capital[/caption]
We leave no stone unturned when looking for the next great investment idea. For example, we believe electric vehicles and energy storage are set to become giant markets, and we want to take advantage of the declining lithium prices amid the COVID-19 pandemic. So we are checking out investment opportunities like this one. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic's significance before most investors. Keeping this in mind we're going to take a peek at the new hedge fund action regarding Altra Industrial Motion Corp. (NASDAQ:AIMC).
What does smart money think about Altra Industrial Motion Corp. (NASDAQ:AIMC)?
Heading into the first quarter of 2020, a total of 15 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 0% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards AIMC over the last 18 quarters. So, let's find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Gates Capital Management held the most valuable stake in Altra Industrial Motion Corp. (NASDAQ:AIMC), which was worth $133.2 million at the end of the third quarter. On the second spot was Citadel Investment Group which amassed $22.3 million worth of shares. ACK Asset Management, Renaissance Technologies, and D E Shaw 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 Gates Capital Management allocated the biggest weight to Altra Industrial Motion Corp. (NASDAQ:AIMC), around 5.84% of its 13F portfolio. ACK Asset Management is also relatively very bullish on the stock, designating 4.46 percent of its 13F equity portfolio to AIMC.
Seeing as Altra Industrial Motion Corp. (NASDAQ:AIMC) has witnessed falling interest from hedge fund managers, logic holds that there was a specific group of hedgies that slashed their entire stakes by the end of the third quarter. It's worth mentioning that Phill Gross and Robert Atchinson's Adage Capital Management said goodbye to the biggest position of the "upper crust" of funds followed by Insider Monkey, comprising an estimated $5.4 million in stock, and Julian Allen's Spitfire Capital 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 stayed the same (this is a bearish signal in our experience).
Let's go over hedge fund activity in other stocks - not necessarily in the same industry as Altra Industrial Motion Corp. (NASDAQ:AIMC) but similarly valued. We will take a look at Holly Energy Partners, L.P. (NYSE:HEP), Urban Edge Properties (NYSE:UE), Worthington Industries, Inc. (NYSE:WOR), and Cadence Bancorporation (NYSE:CADE). All of these stocks' market caps are similar to AIMC's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position HEP,5,21261,-1 UE,19,86028,6 WOR,25,61206,1 CADE,22,177353,2 Average,17.75,86462,2 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 17.75 hedge funds with bullish positions and the average amount invested in these stocks was $86 million. That figure was $203 million in AIMC's case. Worthington Industries, Inc. (NYSE:WOR) is the most popular stock in this table. On the other hand Holly Energy Partners, L.P. (NYSE:HEP) is the least popular one with only 5 bullish hedge fund positions. Altra Industrial Motion Corp. (NASDAQ:AIMC) is not the least popular stock in this group but hedge fund interest is still below average. 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 10.1 percentage points. These stocks lost 13.0% in 2020 through April 6th but beat the market by 4.2 percentage points. Unfortunately AIMC wasn't nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); AIMC investors were disappointed as the stock returned -50.1% 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 20 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020. Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.