At the end of February we announced the arrival of the first US recession since 2009 and we predicted that the market will decline by at least 20% in (Recession is Imminent: We Need A Travel Ban NOW). In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. In this article, we will take a closer look at hedge fund sentiment towards Applied Materials, Inc. (NASDAQ:AMAT).
Applied Materials, Inc. (NASDAQ:AMAT) investors should pay attention to a decrease in enthusiasm from smart money recently. AMAT was in 56 hedge funds' portfolios at the end of the first quarter of 2020. There were 72 hedge funds in our database with AMAT positions at the end of the previous quarter. Our calculations also showed that AMAT 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.
According to most market participants, hedge funds are seen as underperforming, outdated financial tools of years past. While there are greater than 8000 funds trading today, Our researchers look at the bigwigs of this group, about 850 funds. It is estimated that this group of investors preside over the lion's share of all hedge funds' total asset base, and by keeping track of their top stock picks, Insider Monkey has figured out a number of investment strategies that have historically defeated the S&P 500 index. Insider Monkey's flagship short hedge fund strategy exceeded the S&P 500 short ETFs by around 20 percentage points per year 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 .
[caption id="attachment_364853" align="aligncenter" width="400"] William Von Mueffling of Cantillon Capital Management[/caption]
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, we are still not out of the woods in terms of the coronavirus pandemic. So, we checked out this analyst’s “corona catalyst plays“. We interview hedge fund managers and ask them about best ideas. You can watch our latest hedge fund manager interview here and find out the name of the large-cap healthcare stock that Sio Capital’s Michael Castor expects to double. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Now let's take a look at the fresh hedge fund action encompassing Applied Materials, Inc. (NASDAQ:AMAT).
How are hedge funds trading Applied Materials, Inc. (NASDAQ:AMAT)?
Heading into the second quarter of 2020, a total of 56 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -22% from one quarter earlier. By comparison, 42 hedge funds held shares or bullish call options in AMAT a year ago. So, let's check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Of the funds tracked by Insider Monkey, Cliff Asness's AQR Capital Management has the biggest position in Applied Materials, Inc. (NASDAQ:AMAT), worth close to $298 million, amounting to 0.5% of its total 13F portfolio. The second largest stake is held by Matrix Capital Management, managed by David Goel and Paul Ferri, which holds a $225.1 million position; 5.8% of its 13F portfolio is allocated to the stock. Other peers that hold long positions include Alex Snow's Lansdowne Partners, David Blood and Al Gore's Generation Investment Management and Peter Rathjens, Bruce Clarke and John Campbell's Arrowstreet Capital. In terms of the portfolio weights assigned to each position Lansdowne Partners allocated the biggest weight to Applied Materials, Inc. (NASDAQ:AMAT), around 11.52% of its 13F portfolio. Praesidium Investment Management Company is also relatively very bullish on the stock, designating 6.09 percent of its 13F equity portfolio to AMAT.
Because Applied Materials, Inc. (NASDAQ:AMAT) has experienced bearish sentiment from the entirety of the hedge funds we track, it's easy to see that there exists a select few hedgies who sold off their full holdings in the third quarter. Interestingly, Gavin M. Abrams's Abrams Bison Investments cut the biggest investment of the 750 funds followed by Insider Monkey, valued at about $117.9 million in stock, and Brandon Haley's Holocene Advisors was right behind this move, as the fund sold off about $46.4 million worth. These moves are interesting, as total hedge fund interest was cut by 16 funds in the third quarter.
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. We will take a look at Pinduoduo Inc. (NASDAQ:PDD), TC Energy Corporation (NYSE:TRP), Humana Inc (NYSE:HUM), and Truist Financial Corporation (NYSE:TFC). This group of stocks' market values are closest to AMAT's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position PDD,28,1671925,-4 TRP,24,182598,2 HUM,70,4246626,-5 TFC,34,551498,-1 Average,39,1663162,-2 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 39 hedge funds with bullish positions and the average amount invested in these stocks was $1663 million. That figure was $2318 million in AMAT's case. Humana Inc (NYSE:HUM) is the most popular stock in this table. On the other hand TC Energy Corporation (NYSE:TRP) is the least popular one with only 24 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 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 7.9% in 2020 through May 22nd but still beat the market by 15.6 percentage points. Hedge funds were also right about betting on AMAT, though not to the same extent, as the stock returned 19.2% during the first two months of the second quarter (through May 22nd) and outperformed the market as well.
Disclosure: None. This article was originally published at Insider Monkey.