The market has been volatile in the fourth quarter as the Federal Reserve continued its rate hikes to normalize the interest rates. Small cap stocks have been hit hard as a result, as the Russell 2000 ETF (IWM) has underperformed the larger S&P 500 ETF (SPY) by nearly 7 percentage points. SEC filings and hedge fund investor letters indicate that the smart money seems to be paring back their overall long exposure since summer months, and the funds' movements is one of the reasons why the major indexes have retraced. In this article, we analyze what the smart money thinks of American Greetings Corporation (NYSE:AM) and find out how it is affected by hedge funds' moves.
American Greetings Corporation (NYSE:AM) investors should be aware of a decrease in enthusiasm from smart money of late. AM was in 7 hedge funds' portfolios at the end of the fourth quarter of 2018. There were 11 hedge funds in our database with AM holdings at the end of the previous quarter. Our calculations also showed that AM isn't among the 30 most popular stocks among hedge funds.
Hedge funds' reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn't keep up with the unhedged returns of the market indices. Our research has shown that hedge funds' large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the market by 32 percentage points since May 2014 through March 12, 2019 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that'll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 27.5% through March 12, 2019. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
We're going to take a look at the new hedge fund action encompassing American Greetings Corporation (NYSE:AM).
How are hedge funds trading American Greetings Corporation (NYSE:AM)?
At Q4's end, a total of 7 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -36% from the second quarter of 2018. Below, you can check out the change in hedge fund sentiment towards AM over the last 14 quarters. With hedgies' sentiment swirling, there exists an "upper tier" of notable hedge fund managers who were boosting their stakes significantly (or already accumulated large positions).
Among these funds, Osterweis Capital Management held the most valuable stake in American Greetings Corporation (NYSE:AM), which was worth $5.3 million at the end of the third quarter. On the second spot was Zimmer Partners which amassed $5.1 million worth of shares. Moreover, Arrowstreet Capital, Driehaus Capital, and Water Island Capital were also bullish on American Greetings Corporation (NYSE:AM), allocating a large percentage of their portfolios to this stock.
Due to the fact that American Greetings Corporation (NYSE:AM) has witnessed bearish sentiment from hedge fund managers, we can see that there was a specific group of fund managers who sold off their full holdings heading into Q3. At the top of the heap, Alan Fournier's Pennant Capital Management cut the largest position of the 700 funds followed by Insider Monkey, comprising about $11.5 million in stock, and Daniel Arbess's Perella Weinberg Partners was right behind this move, as the fund said goodbye to about $10.2 million worth. These moves are important to note, as aggregate hedge fund interest fell by 4 funds heading into Q3.
Let's go over hedge fund activity in other stocks - not necessarily in the same industry as American Greetings Corporation (NYSE:AM) but similarly valued. These stocks are Hawaiian Electric Industries, Inc. (NYSE:HE), Tribune Media Company (NYSE:TRCO), Spirit Airlines Incorporated (NASDAQ:SAVE), and Entegris Inc (NASDAQ:ENTG). This group of stocks' market valuations match AM's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position HE,13,162017,2 TRCO,40,1421487,1 SAVE,30,518075,10 ENTG,18,423363,-7 Average,25.25,631236,1.5 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 25.25 hedge funds with bullish positions and the average amount invested in these stocks was $631 million. That figure was $19 million in AM's case. Tribune Media Company (NYSE:TRCO) is the most popular stock in this table. On the other hand Hawaiian Electric Industries, Inc. (NYSE:HE) is the least popular one with only 13 bullish hedge fund positions. Compared to these stocks American Greetings Corporation (NYSE:AM) is even less popular than HE. Our calculations showed that top 15 most popular stocks) among hedge funds returned 24.2% through April 22nd and outperformed the S&P 500 ETF (SPY) by more than 7 percentage points. A small number of hedge funds were also right about betting on AM, though not to the same extent, as the stock returned 22.4% and outperformed the market as well.
Disclosure: None. This article was originally published at Insider Monkey.