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The fourth quarter was a rough one for most investors, as fears of a rising interest rate environment in the U.S, a trade war with China, and a more or less stagnant Europe, weighed heavily on the minds of investors. Both the S&P 500 and Russell 2000 sank as a result, with the Russell 2000, which is composed of smaller companies, being hit especially hard. This was primarily due to hedge funds, which are big supporters of small-cap stocks, pulling some of their capital out of the volatile markets during this time. Let's look at how this market volatility affected the sentiment of hedge funds towards America Movil SAB de CV (NYSE:AMX), and what that likely means for the prospects of the company and its stock.
Hedge fund interest in America Movil SAB de CV (NYSE:AMX) shares was flat at the end of last quarter. This is usually a negative indicator. The level and the change in hedge fund popularity aren't the only variables you need to analyze to decipher hedge funds' perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That's why at the end of this article we will examine companies such as Honda Motor Co Ltd (NYSE:HMC), Bank of Montreal (NYSE:BMO), and Micron Technology, Inc. (NASDAQ:MU) to gather more data points.
Why do we pay any attention at all to hedge fund sentiment? 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 market by 18 percentage points since May 2014 through December 3, 2018 (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 24% through December 3, 2018. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Let's view the fresh hedge fund action encompassing America Movil SAB de CV (NYSE:AMX).
How are hedge funds trading America Movil SAB de CV (NYSE:AMX)?
At the end of the third quarter, a total of 10 of the hedge funds tracked by Insider Monkey were long this stock, representing no change from the second quarter of 2018. By comparison, 11 hedge funds held shares or bullish call options in AMX heading into this year. So, let's check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Fisher Asset Management was the largest shareholder of America Movil SAB de CV (NYSE:AMX), with a stake worth $220.9 million reported as of the end of September. Trailing Fisher Asset Management was Renaissance Technologies, which amassed a stake valued at $13.7 million. AQR Capital Management, Prince Street Capital Management, and Millennium Management were also very fond of the stock, giving the stock large weights in their portfolios.
Because America Movil SAB de CV (NYSE:AMX) has witnessed a decline in interest from the entirety of the hedge funds we track, it's safe to say that there is a sect of hedgies who were dropping their full holdings last quarter. Interestingly, Noam Gottesman's GLG Partners cut the biggest investment of the 700 funds tracked by Insider Monkey, worth about $15.9 million in stock. Mario Gabelli's fund, GAMCO Investors, also cut its stock, about $0.6 million worth. These bearish behaviors are important to note, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).
Let's now take a look at hedge fund activity in other stocks - not necessarily in the same industry as America Movil SAB de CV (NYSE:AMX) but similarly valued. These stocks are Honda Motor Co Ltd (NYSE:HMC), Bank of Montreal (NYSE:BMO), Micron Technology, Inc. (NASDAQ:MU), and Phillips 66 (NYSE:PSX). This group of stocks' market caps match AMX's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position HMC,11,117617,-2 BMO,13,658815,0 MU,59,4083502,-7 PSX,43,3179242,6 Average,31.5,2009794,-0.75 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 31.5 hedge funds with bullish positions and the average amount invested in these stocks was $2.01 billion. That figure was $266 million in AMX's case. Micron Technology, Inc. (NASDAQ:MU) is the most popular stock in this table. On the other hand Honda Motor Co Ltd (NYSE:HMC) is the least popular one with only 11 bullish hedge fund positions. Compared to these stocks America Movil SAB de CV (NYSE:AMX) is even less popular than HMC. Considering that hedge funds aren't fond of this stock in relation to other companies analyzed in this article, it may be a good idea to analyze it in detail and understand why the smart money isn't behind this stock. This isn't necessarily bad news. Although it is possible that hedge funds may think the stock is overpriced and view the stock as a short candidate, they may not be very familiar with the bullish thesis. In either case more research is warranted.
Disclosure: None. This article was originally published at Insider Monkey.
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