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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 ACCO Brands Corporation (NYSE:ACCO) and determine whether hedge funds had an edge regarding this stock.
Hedge fund interest in ACCO Brands Corporation (NYSE:ACCO) 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 A10 Networks Inc (NYSE:ATEN), Vermilion Energy Inc (NYSE:VET), and RPT Realty (NYSE:RPT) to gather more data points. Our calculations also showed that ACCO isn't among the 30 most popular stocks among hedge funds (click for Q1 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.
In the eyes of most investors, hedge funds are seen as underperforming, old investment vehicles of years past. While there are more than 8000 funds with their doors open today, We hone in on the elite of this club, about 850 funds. These hedge fund managers administer the lion's share of all hedge funds' total asset base, and by observing their finest stock picks, Insider Monkey has figured out numerous investment strategies that have historically outperformed the market. Insider Monkey's flagship short hedge fund strategy outperformed the S&P 500 short ETFs by around 20 percentage points per annum since its inception in March 2017. Our portfolio of short stocks lost 36% since February 2017 (through May 18th) even though the market was up 30% during the same period. We just shared a list of 8 short targets in our latest quarterly update .
John Overdeck of Two Sigma Advisors
At Insider Monkey we scour multiple sources to uncover the next great investment idea. Cannabis stocks are roaring back in 2020, so we are checking out this under-the-radar stock. We go through lists like the 10 most profitable companies in America 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. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. With all of this in mind we're going to analyze the key hedge fund action surrounding ACCO Brands Corporation (NYSE:ACCO).
Hedge fund activity in ACCO Brands Corporation (NYSE:ACCO)
At the end of the first quarter, a total of 18 of the hedge funds tracked by Insider Monkey were long this stock, a change of 0% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards ACCO over the last 18 quarters. With hedgies' positions undergoing their usual ebb and flow, there exists an "upper tier" of notable hedge fund managers who were boosting their stakes considerably (or already accumulated large positions).
Among these funds, Arrowstreet Capital held the most valuable stake in ACCO Brands Corporation (NYSE:ACCO), which was worth $8.4 million at the end of the third quarter. On the second spot was D E Shaw which amassed $4.7 million worth of shares. Two Sigma Advisors, AQR Capital Management, and Marshall Wace LLP 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 Zebra Capital Management allocated the biggest weight to ACCO Brands Corporation (NYSE:ACCO), around 0.16% of its 13F portfolio. Ancora Advisors is also relatively very bullish on the stock, designating 0.03 percent of its 13F equity portfolio to ACCO.
Seeing as ACCO Brands Corporation (NYSE:ACCO) has experienced a decline in interest from hedge fund managers, logic holds that there is a sect of fund managers that decided to sell off their entire stakes last quarter. It's worth mentioning that Noam Gottesman's GLG Partners dumped the biggest stake of the 750 funds watched by Insider Monkey, worth about $0.4 million in stock, and Lee Ainslie's Maverick Capital was right behind this move, as the fund said goodbye to about $0.4 million worth. These transactions are interesting, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).
Let's go over hedge fund activity in other stocks - not necessarily in the same industry as ACCO Brands Corporation (NYSE:ACCO) but similarly valued. These stocks are A10 Networks Inc (NYSE:ATEN), Vermilion Energy Inc (NYSE:VET), RPT Realty (NYSE:RPT), and Assembly Biosciences Inc (NASDAQ:ASMB). This group of stocks' market valuations match ACCO's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position ATEN,19,110335,1 VET,8,1314,0 RPT,12,16984,-1 ASMB,18,179031,-2 Average,14.25,76916,-0.5 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 14.25 hedge funds with bullish positions and the average amount invested in these stocks was $77 million. That figure was $27 million in ACCO's case. A10 Networks Inc (NYSE:ATEN) is the most popular stock in this table. On the other hand Vermilion Energy Inc (NYSE:VET) is the least popular one with only 8 bullish hedge fund positions. ACCO Brands Corporation (NYSE:ACCO) is not the most popular stock in this group but hedge fund interest is still above average. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 18.6% in 2020 through July 27th but still beat the market by 17.1 percentage points. Hedge funds were also right about betting on ACCO as the stock returned 37.3% since Q1 and outperformed the market. Hedge funds were rewarded for their relative bullishness.
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Disclosure: None. This article was originally published at Insider Monkey.