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Is Antero Midstream Corp (AM) Going To Burn These Hedge Funds?

Debasis Saha

We are still in an overall bull market and many stocks that smart money investors were piling into surged through the end of November. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained 54% and 51% respectively. Hedge funds' top 3 stock picks returned 41.7% this year and beat the S&P 500 ETFs by 14 percentage points. Investing in index funds guarantees you average returns, not superior returns. We are looking to generate superior returns for our readers. That's why we believe it isn't a waste of time to check out hedge fund sentiment before you invest in a stock like Antero Midstream Corp (NYSE:AM).

Is Antero Midstream Corp (NYSE:AM) a healthy stock for your portfolio? Prominent investors are getting more bullish. The number of bullish hedge fund positions improved by 1 lately. Our calculations also showed that AM isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings). Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

5 Most Popular Stocks Among Hedge Funds

To most market participants, hedge funds are perceived as unimportant, old financial tools of yesteryear. While there are more than 8000 funds in operation today, Our experts hone in on the upper echelon of this club, about 750 funds. Most estimates calculate that this group of people shepherd most of all hedge funds' total capital, and by tailing their inimitable picks, Insider Monkey has deciphered a few investment strategies that have historically outstripped the broader indices. Insider Monkey's flagship short hedge fund strategy outperformed the S&P 500 short ETFs by around 20 percentage points annually since its inception in May 2014. Our portfolio of short stocks lost 27.8% since February 2017 (through November 21st) even though the market was up more than 39% during the same period. We just shared a list of 7 short targets in our latest quarterly update .

[caption id="attachment_749689" align="alignnone" width="1600"] Christer Gardell of Cevian Capital[/caption]

Christer Gardell Cevian Capital

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. We're going to go over the key hedge fund action encompassing Antero Midstream Corp (NYSE:AM).

How have hedgies been trading Antero Midstream Corp (NYSE:AM)?

At Q3's end, a total of 16 of the hedge funds tracked by Insider Monkey were long this stock, a change of 7% from the previous quarter. The graph below displays the number of hedge funds with bullish position in AM over the last 17 quarters. With hedge funds' sentiment swirling, there exists a select group of key hedge fund managers who were upping their stakes meaningfully (or already accumulated large positions).

Is AM A Good Stock To Buy?

The largest stake in Antero Midstream Corp (NYSE:AM) was held by FPR Partners, which reported holding $79.3 million worth of stock at the end of September. It was followed by Pennant Capital Management with a $21.8 million position. Other investors bullish on the company included Mountain Lake Investment Management, Redwood Capital Management, and Millennium Management. In terms of the portfolio weights assigned to each position Pennant Capital Management allocated the biggest weight to Antero Midstream Corp (NYSE:AM), around 7.69% of its 13F portfolio. Mountain Lake Investment Management is also relatively very bullish on the stock, setting aside 4.4 percent of its 13F equity portfolio to AM.

With a general bullishness amongst the heavyweights, specific money managers have been driving this bullishness. Redwood Capital Management, managed by Jonathan Kolatch, initiated the most outsized position in Antero Midstream Corp (NYSE:AM). Redwood Capital Management had $5.9 million invested in the company at the end of the quarter. Noam Gottesman's GLG Partners also made a $0.6 million investment in the stock during the quarter. The other funds with new positions in the stock are Mike Vranos's Ellington, Mark Coe's Intrinsic Edge Capital, and Richard Chilton's Chilton Investment Company.

Let's check out hedge fund activity in other stocks similar to Antero Midstream Corp (NYSE:AM). These stocks are F.N.B. Corp (NYSE:FNB), Weingarten Realty Investors (NYSE:WRI), Stag Industrial Inc (NYSE:STAG), and Lazard Ltd (NYSE:LAZ). All of these stocks' market caps match AM's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position FNB,18,107990,-1 WRI,19,170653,-1 STAG,20,217915,9 LAZ,13,600550,-3 Average,17.5,274277,1 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 17.5 hedge funds with bullish positions and the average amount invested in these stocks was $274 million. That figure was $139 million in AM's case. Stag Industrial Inc (NYSE:STAG) is the most popular stock in this table. On the other hand Lazard Ltd (NYSE:LAZ) is the least popular one with only 13 bullish hedge fund positions. Antero Midstream Corp (NYSE:AM) 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 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately AM wasn't nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); AM investors were disappointed as the stock returned -35.3% during the first two months of the fourth quarter 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 in Q4.

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

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