The first quarter was a breeze as Powell pivoted, and China seemed eager to reach a deal with Trump. Both the S&P 500 and Russell 2000 delivered very strong gains as a result, with the Russell 2000, which is composed of smaller companies, outperforming the large-cap stocks slightly during the first quarter. Unfortunately sentiment shifted in May and August as this time China pivoted and Trump put more pressure on China by increasing tariffs. Fourth quarter brought optimism to the markets and hedge funds' top 20 stock picks performed spectacularly in this volatile environment. These stocks delivered a total gain of 37.4% through the end of November, vs. a gain of 27.5% for the S&P 500 ETF. In this article we will look at how this market volatility affected the sentiment of hedge funds towards Albany International Corp. (NYSE:AIN), and what that likely means for the prospects of the company and its stock.
Albany International Corp. (NYSE:AIN) has experienced a decrease in activity from the world's largest hedge funds recently. AIN was in 12 hedge funds' portfolios at the end of the third quarter of 2019. There were 15 hedge funds in our database with AIN positions at the end of the previous quarter. Our calculations also showed that AIN isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings). Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
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 Russell 2000 ETFs by 40 percentage points since May 2014 (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 27.8% through November 21, 2019. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
[caption id="attachment_26092" align="aligncenter" width="482"] Joel Greenblatt of Gotham Asset Management[/caption]
We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world's largest cannabis market, so we check out this European marijuana stock pitch. One of the most bullish analysts in America just put his money where his mouth is. He says, "I'm investing more today than I did back in early 2009." So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We also rely on the best performing hedge funds' buy/sell signals. We're going to review the fresh hedge fund action encompassing Albany International Corp. (NYSE:AIN).
How have hedgies been trading Albany International Corp. (NYSE:AIN)?
Heading into the fourth quarter of 2019, a total of 12 of the hedge funds tracked by Insider Monkey were long this stock, a change of -20% from the second quarter of 2019. Below, you can check out the change in hedge fund sentiment towards AIN over the last 17 quarters. So, let's examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Albany International Corp. (NYSE:AIN) was held by Renaissance Technologies, which reported holding $59.3 million worth of stock at the end of September. It was followed by Marshall Wace with a $4.9 million position. Other investors bullish on the company included GAMCO Investors, Driehaus Capital, and Gotham Asset Management. In terms of the portfolio weights assigned to each position Waratah Capital Advisors allocated the biggest weight to Albany International Corp. (NYSE:AIN), around 0.15% of its 13F portfolio. Driehaus Capital is also relatively very bullish on the stock, designating 0.1 percent of its 13F equity portfolio to AIN.
Judging by the fact that Albany International Corp. (NYSE:AIN) has witnessed declining sentiment from hedge fund managers, we can see that there was a specific group of hedge funds that decided to sell off their full holdings heading into Q4. Interestingly, David E. Shaw's D E Shaw dumped the largest investment of the "upper crust" of funds monitored by Insider Monkey, worth an estimated $1.2 million in stock, and Minhua Zhang's Weld Capital Management was right behind this move, as the fund sold off about $0.8 million worth. These bearish behaviors are interesting, as total hedge fund interest dropped by 3 funds heading into Q4.
Let's check out hedge fund activity in other stocks - not necessarily in the same industry as Albany International Corp. (NYSE:AIN) but similarly valued. We will take a look at Sensient Technologies Corporation (NYSE:SXT), LiveRamp Holdings, Inc. (NYSE:RAMP), Global Blood Therapeutics Inc (NASDAQ:GBT), and International Game Technology PLC (NYSE:IGT). This group of stocks' market caps are similar to AIN's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position SXT,15,69055,3 RAMP,17,199071,-5 GBT,24,543271,-6 IGT,27,234121,-3 Average,20.75,261380,-2.75 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 20.75 hedge funds with bullish positions and the average amount invested in these stocks was $261 million. That figure was $82 million in AIN's case. International Game Technology PLC (NYSE:IGT) is the most popular stock in this table. On the other hand Sensient Technologies Corporation (NYSE:SXT) is the least popular one with only 15 bullish hedge fund positions. Compared to these stocks Albany International Corp. (NYSE:AIN) is even less popular than SXT. Hedge funds dodged a bullet by taking a bearish stance towards AIN. Our calculations showed that the top 20 most popular hedge fund stocks returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately AIN wasn't nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); AIN investors were disappointed as the stock returned -7.2% during the fourth quarter (through the end of November) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as 70 percent of these stocks already outperformed the market so far in Q4.
Disclosure: None. This article was originally published at Insider Monkey.