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Is AMC Entertainment Holdings Inc (AMC) Going to Burn These Hedge Funds?

Nina Todic

The financial regulations require hedge funds and wealthy investors that exceeded the $100 million equity holdings threshold to file a report that shows their positions at the end of every quarter. Even though it isn't the intention, these filings to a certain extent level the playing field for ordinary investors. The latest round of 13F filings disclosed the funds' positions on September 30th. We at Insider Monkey have made an extensive database of nearly 750 of those established hedge funds and famous value investors' filings. In this article, we analyze how these elite funds and prominent investors traded AMC Entertainment Holdings Inc (NYSE:AMC) based on those filings.

Is AMC Entertainment Holdings Inc (NYSE:AMC) a first-rate investment right now? Prominent investors are getting less optimistic. The number of bullish hedge fund bets were cut by 4 recently. Our calculations also showed that AMC isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings). AMC was in 12 hedge funds' portfolios at the end of September. There were 16 hedge funds in our database with AMC positions at the end of the previous quarter. Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

5 Most Popular Stocks Among Hedge Funds

Hedge funds' reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn't keep up with the unhedged returns of the market indices. Our research has shown that hedge funds' large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the Russell 2000 ETFs by 40 percentage points since May 2014 (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 27.8% through November 21, 2019. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

[caption id="attachment_339352" align="aligncenter" width="500"] Joe Huber of Huber Capital Management[/caption]

Joe Huber - Huber Capital Management

We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world's largest cannabis market, so we check out this European marijuana stock pitch. One of the most bullish analysts in America just put his money where his mouth is. He says, "I'm investing more today than I did back in early 2009." So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We also rely on the best performing hedge funds' buy/sell signals. Let's check out the key hedge fund action surrounding AMC Entertainment Holdings Inc (NYSE:AMC).

How are hedge funds trading AMC Entertainment Holdings Inc (NYSE:AMC)?

At the end of the third quarter, a total of 12 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -25% from the previous quarter. The graph below displays the number of hedge funds with bullish position in AMC over the last 17 quarters. With hedgies' capital changing hands, there exists a select group of notable hedge fund managers who were adding to their stakes meaningfully (or already accumulated large positions).

The largest stake in AMC Entertainment Holdings Inc (NYSE:AMC) was held by Greenvale Capital, which reported holding $46.8 million worth of stock at the end of September. It was followed by Renaissance Technologies with a $30.6 million position. Other investors bullish on the company included Millennium Management, Citadel Investment Group, and Huber Capital Management. In terms of the portfolio weights assigned to each position Greenvale Capital allocated the biggest weight to AMC Entertainment Holdings Inc (NYSE:AMC), around 14% of its 13F portfolio. Huber Capital Management is also relatively very bullish on the stock, earmarking 0.3 percent of its 13F equity portfolio to AMC.

Since AMC Entertainment Holdings Inc (NYSE:AMC) has experienced a decline in interest from the entirety of the hedge funds we track, it's safe to say that there is a sect of hedge funds that slashed their entire stakes in the third quarter. It's worth mentioning that Brett Hendrickson's Nokomis Capital sold off the largest investment of the "upper crust" of funds monitored by Insider Monkey, valued at an estimated $5.5 million in stock. Lee Ainslie's fund, Maverick Capital, also said goodbye to its stock, about $2.2 million worth. These bearish behaviors are important to note, as aggregate hedge fund interest dropped by 4 funds in the third quarter.

Let's now review hedge fund activity in other stocks similar to AMC Entertainment Holdings Inc (NYSE:AMC). We will take a look at Opera Limited (NASDAQ:OPRA), Five Point Holdings, LLC (NYSE:FPH), Oasis Petroleum Inc. (NYSE:OAS), and Ra Pharmaceuticals, Inc. (NASDAQ:RARX). This group of stocks' market caps are closest to AMC's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position OPRA,13,26943,7 FPH,14,255856,0 OAS,15,160691,-6 RARX,21,320734,3 Average,15.75,191056,1 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 15.75 hedge funds with bullish positions and the average amount invested in these stocks was $191 million. That figure was $97 million in AMC's case. Ra Pharmaceuticals, Inc. (NASDAQ:RARX) is the most popular stock in this table. On the other hand Opera Limited (NASDAQ:OPRA) is the least popular one with only 13 bullish hedge fund positions. Compared to these stocks AMC Entertainment Holdings Inc (NYSE:AMC) is even less popular than OPRA. Hedge funds dodged a bullet by taking a bearish stance towards AMC. Our calculations showed that the top 20 most popular hedge fund stocks returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately AMC wasn't nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); AMC investors were disappointed as the stock returned -21.7% during the fourth quarter (through the end of November) 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 70 percent of these stocks already outperformed the market so far in Q4.

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

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