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Is Applied Materials, Inc. (AMAT) Going to Burn These Hedge Funds?

Nina Todic

Hedge funds run by legendary names like George Soros and David Tepper make billions of dollars a year for themselves and their super-rich accredited investors (you’ve got to have a minimum of $1 million liquid to invest in a hedge fund) by spending enormous resources on analyzing and uncovering data about small-cap stocks that the big brokerage houses don’t follow. Small caps are where they can generate significant outperformance. That's why we pay special attention to hedge fund activity in these stocks.

Is Applied Materials, Inc. (NASDAQ:AMAT) a buy, sell, or hold? Hedge funds are turning bullish. The number of long hedge fund positions increased by 2 lately. Our calculations also showed that AMAT isn't among the 30 most popular stocks among hedge funds.

In the financial world there are a lot of formulas stock traders can use to size up stocks. A pair of the less utilized formulas are hedge fund and insider trading signals. We have shown that, historically, those who follow the top picks of the best money managers can outperform their index-focused peers by a solid amount (see the details here).

David Blood

Unlike some fund managers who are betting on Dow reaching 40000 in a year, our long-short investment strategy doesn't rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. We're going to take a look at the key hedge fund action encompassing Applied Materials, Inc. (NASDAQ:AMAT).

How are hedge funds trading Applied Materials, Inc. (NASDAQ:AMAT)?

At the end of the second quarter, a total of 44 of the hedge funds tracked by Insider Monkey were long this stock, a change of 5% from the first quarter of 2019. The graph below displays the number of hedge funds with bullish position in AMAT over the last 16 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.

No of Hedge Funds with AMAT Positions

Of the funds tracked by Insider Monkey, AQR Capital Management, managed by Cliff Asness, holds the most valuable position in Applied Materials, Inc. (NASDAQ:AMAT). AQR Capital Management has a $379.9 million position in the stock, comprising 0.4% of its 13F portfolio. The second largest stake is held by Generation Investment Management, led by David Blood and Al Gore, holding a $205 million position; the fund has 1.4% of its 13F portfolio invested in the stock. Remaining professional money managers with similar optimism encompass Ken Griffin's Citadel Investment Group, David Goel and Paul Ferri's Matrix Capital Management and D. E. Shaw's D E Shaw.

Now, key money managers were leading the bulls' herd. Generation Investment Management, managed by David Blood and Al Gore, initiated the biggest position in Applied Materials, Inc. (NASDAQ:AMAT). Generation Investment Management had $205 million invested in the company at the end of the quarter. Brandon Haley's Holocene Advisors also initiated a $19.4 million position during the quarter. The other funds with brand new AMAT positions are Julian Robertson's Tiger Management, Brian Ashford-Russell and Tim Woolley's Polar Capital, and Michael Kharitonov and Jon David McAuliffe's Voleon Capital.

Let's now take a look at hedge fund activity in other stocks - not necessarily in the same industry as Applied Materials, Inc. (NASDAQ:AMAT) but similarly valued. These stocks are Baidu, Inc. (NASDAQ:BIDU), Baxter International Inc. (NYSE:BAX), FedEx Corporation (NYSE:FDX), and BCE Inc. (NYSE:BCE). This group of stocks' market caps are similar to AMAT's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position BIDU,44,1822939,-9 BAX,34,2818359,4 FDX,40,1808917,-1 BCE,14,364792,-2 Average,33,1703752,-2 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 33 hedge funds with bullish positions and the average amount invested in these stocks was $1704 million. That figure was $1997 million in AMAT's case. Baidu, Inc. (NASDAQ:BIDU) is the most popular stock in this table. On the other hand BCE Inc. (NYSE:BCE) is the least popular one with only 14 bullish hedge fund positions. Applied Materials, Inc. (NASDAQ:AMAT) is not the most popular stock in this group but hedge fund interest is still above average. Our calculations showed that top 20 most popular stocks among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Hedge funds were also right about betting on AMAT as the stock returned 11.6% during the third quarter and outperformed the market. Hedge funds were rewarded for their relative bullishness. Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

5 Most Popular Stocks Among Hedge Funds

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

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