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Hedge funds and large money managers usually invest with a focus on the long-term horizon and, therefore, short-lived dips or bumps on the charts usually don't make them change their opinion towards a company. This time it may be different. The coronavirus pandemic destroyed the high correlations among major industries and asset classes. We are now in a stock pickers market where fundamentals of a stock have more effect on the price than the overall direction of the market. As a result we observe sudden and large changes in hedge fund positions depending on the news flow. Let’s take a look at the hedge fund sentiment towards American Woodmark Corporation (NASDAQ:AMWD) to find out whether there were any major changes in hedge funds' views.
Is AWMD a good stock to buy now? American Woodmark Corporation (NASDAQ:AMWD) has experienced a decrease in hedge fund interest recently. American Woodmark Corporation (NASDAQ:AMWD) was in 15 hedge funds' portfolios at the end of the third quarter of 2020. The all time high for this statistic is 17. Our calculations also showed that AMWD 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.
To the average investor there are several methods shareholders employ to evaluate stocks. A duo of the most underrated methods are hedge fund and insider trading signals. We have shown that, historically, those who follow the top picks of the top hedge fund managers can outperform the S&P 500 by a solid margin (see the details here).
Dmitry Balyasny of Balyasny Asset Management
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 15 best blue chip stocks 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. Now we're going to analyze the recent hedge fund action encompassing American Woodmark Corporation (NASDAQ:AMWD).
Do Hedge Funds Think AMWD Is A Good Stock To Buy Now?
At Q3's end, a total of 15 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -6% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in AMWD over the last 21 quarters. So, let's examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Royce & Associates held the most valuable stake in American Woodmark Corporation (NASDAQ:AMWD), which was worth $12.5 million at the end of the third quarter. On the second spot was Arrowstreet Capital which amassed $11.5 million worth of shares. Citadel Investment Group, Millennium Management, and Citadel Investment Group 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 Voss Capital allocated the biggest weight to American Woodmark Corporation (NASDAQ:AMWD), around 1.45% of its 13F portfolio. Quantinno Capital is also relatively very bullish on the stock, dishing out 0.23 percent of its 13F equity portfolio to AMWD.
Because American Woodmark Corporation (NASDAQ:AMWD) has faced a decline in interest from hedge fund managers, it's easy to see that there lies a certain "tier" of funds that slashed their positions entirely heading into Q4. At the top of the heap, C. Jonathan Gattman's Cloverdale Capital Management said goodbye to the largest stake of the "upper crust" of funds watched by Insider Monkey, worth about $2.1 million in stock, and Peter Lewis's LFL Advisers was right behind this move, as the fund dumped about $0.7 million worth. These bearish behaviors are important to note, as total hedge fund interest was cut by 1 funds heading into Q4.
Let's go over hedge fund activity in other stocks - not necessarily in the same industry as American Woodmark Corporation (NASDAQ:AMWD) but similarly valued. We will take a look at BancFirst Corporation (NASDAQ:BANF), Sirius International Insurance Group, Ltd. (NASDAQ:SG), Gray Television, Inc. (NYSE:GTN), Sangamo Therapeutics, Inc. (NASDAQ:SGMO), So-Young International Inc. (NASDAQ:SY), Apollo Commercial Real Est. Finance Inc (NYSE:ARI), and Allscripts Healthcare Solutions Inc (NASDAQ:MDRX). This group of stocks' market valuations match AMWD's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position BANF,4,3383,-9 SG,6,8559,4 GTN,25,114310,-1 SGMO,28,122664,6 SY,7,15987,0 ARI,14,32597,4 MDRX,22,129055,6 Average,15.1,60936,1.4 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 15.1 hedge funds with bullish positions and the average amount invested in these stocks was $61 million. That figure was $42 million in AMWD's case. Sangamo Therapeutics, Inc. (NASDAQ:SGMO) is the most popular stock in this table. On the other hand BancFirst Corporation (NASDAQ:BANF) is the least popular one with only 4 bullish hedge fund positions. American Woodmark Corporation (NASDAQ:AMWD) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for AMWD is 53.4. 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. 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 30.7% in 2020 through December 14th and still beat the market by 15.8 percentage points. A small number of hedge funds were also right about betting on AMWD as the stock returned 20.5% since the end of the third quarter (through 12/14) and outperformed the market by an even larger margin.
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Disclosure: None. This article was originally published at Insider Monkey.