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How Did Hedge Funds’ Air Products & Chemicals, Inc. (APD) Bets Fare?

·5 min read

How do you pick the next stock to invest in? One way would be to spend days of research browsing through thousands of publicly traded companies. However, an easier way is to look at the stocks that smart money investors are collectively bullish on. Hedge funds and other institutional investors usually invest large amounts of capital and have to conduct due diligence while choosing their next pick. They don't always get it right, but, on average, their stock picks historically generated strong returns after adjusting for known risk factors. With this in mind, let’s take a look at the recent hedge fund activity surrounding Air Products & Chemicals, Inc. (NYSE:APD) and determine whether hedge funds had an edge regarding this stock.

Air Products & Chemicals, Inc. (NYSE:APD) has experienced a decrease in enthusiasm from smart money of late. Air Products & Chemicals, Inc. (NYSE:APD) was in 32 hedge funds' portfolios at the end of September. The all time high for this statistic is 77. Our calculations also showed that APD isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings).

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium prices have more than doubled over the past year, so we go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. Keeping this in mind let's check out the fresh hedge fund action regarding Air Products & Chemicals, Inc. (NYSE:APD).

Zilvinas Zach Mecelis Covalis Capital
Zilvinas Zach Mecelis Covalis Capital

Zilvinas Mecelis of Covalis Capital

Do Hedge Funds Think APD Is A Good Stock To Buy Now?

Heading into the fourth quarter of 2021, a total of 32 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -20% from one quarter earlier. By comparison, 49 hedge funds held shares or bullish call options in APD a year ago. So, let's review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

More specifically, Adage Capital Management was the largest shareholder of Air Products & Chemicals, Inc. (NYSE:APD), with a stake worth $90.1 million reported as of the end of September. Trailing Adage Capital Management was Renaissance Technologies, which amassed a stake valued at $73.6 million. AQR Capital Management, 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 Bronson Point Partners allocated the biggest weight to Air Products & Chemicals, Inc. (NYSE:APD), around 6.72% of its 13F portfolio. MD Sass is also relatively very bullish on the stock, dishing out 3.82 percent of its 13F equity portfolio to APD.

Judging by the fact that Air Products & Chemicals, Inc. (NYSE:APD) has witnessed declining sentiment from the aggregate hedge fund industry, it's easy to see that there were a few funds who were dropping their positions entirely last quarter. At the top of the heap, Ray Dalio's Bridgewater Associates sold off the biggest position of all the hedgies tracked by Insider Monkey, totaling an estimated $23.1 million in stock, and Jonathan Barrett and Paul Segal's Luminus Management was right behind this move, as the fund dropped about $14.8 million worth. These transactions are interesting, as total hedge fund interest fell by 8 funds last quarter.

Let's go over hedge fund activity in other stocks similar to Air Products & Chemicals, Inc. (NYSE:APD). We will take a look at Ford Motor Company (NYSE:F), ING Groep N.V. (NYSE:ING), Twilio Inc. (NYSE:TWLO), Emerson Electric Co. (NYSE:EMR), CrowdStrike Holdings, Inc. (NASDAQ:CRWD), Relx PLC (NYSE:RELX), and UBS Group AG (NYSE:UBS). This group of stocks' market valuations are similar to APD's market valuation.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position F,51,1642491,-4 ING,8,693351,-1 TWLO,96,6369513,-2 EMR,41,671007,-4 CRWD,74,6742307,8 RELX,7,66312,1 UBS,15,166803,0 Average,41.7,2335969,-0.3 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 41.7 hedge funds with bullish positions and the average amount invested in these stocks was $2336 million. That figure was $529 million in APD's case. Twilio Inc. (NYSE:TWLO) is the most popular stock in this table. On the other hand Relx PLC (NYSE:RELX) is the least popular one with only 7 bullish hedge fund positions. Air Products & Chemicals, Inc. (NYSE:APD) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for APD is 23.5. 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 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 29.6% in 2021 and still beat the market by 3.6 percentage points. A small number of hedge funds were also right about betting on APD as the stock returned 10.7% since the end of the third quarter (through 1/31) and outperformed the market by an even larger margin.

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