Russell 2000 ETF (IWM) lagged the larger S&P 500 ETF (SPY) by more than 10 percentage points since the end of the third quarter of 2018 as investors first worried over the possible ramifications of rising interest rates and the escalation of the trade war with China. The hedge funds and institutional investors we track typically invest more in smaller-cap stocks than an average investor (i.e. only about 60% S&P 500 constituents were among the 500 most popular stocks among hedge funds), and we have seen data that shows those funds paring back their overall exposure. Those funds cutting positions in small-caps is one reason why volatility has increased. In the following paragraphs, we take a closer look at what hedge funds and prominent investors think of America Movil SAB de CV (NYSE:AMX) and see how the stock is affected by the recent hedge fund activity.
Is America Movil SAB de CV (NYSE:AMX) a buy, sell, or hold? The best stock pickers are in a pessimistic mood. The number of long hedge fund bets were cut by 5 in recent months. Our calculations also showed that AMX isn't among the 30 most popular stocks among hedge funds. AMX was in 9 hedge funds' portfolios at the end of the second quarter of 2019. There were 14 hedge funds in our database with AMX holdings at the end of the previous quarter.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? Our research has shown that hedge funds' small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the market by 40 percentage points since May 2014 through May 30, 2019 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter. Even if you aren't comfortable with shorting stocks, you should at least avoid initiating long positions in our short portfolio.
Unlike some fund managers who are betting on Dow reaching 40000 in a year, our long-short investment strategy doesn't rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. Let's take a peek at the recent hedge fund action regarding America Movil SAB de CV (NYSE:AMX).
Hedge fund activity in America Movil SAB de CV (NYSE:AMX)
At Q2's end, a total of 9 of the hedge funds tracked by Insider Monkey were long this stock, a change of -36% from the first quarter of 2019. By comparison, 10 hedge funds held shares or bullish call options in AMX a year ago. 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 America Movil SAB de CV (NYSE:AMX) was held by Fisher Asset Management, which reported holding $126.9 million worth of stock at the end of March. It was followed by GLG Partners with a $24.1 million position. Other investors bullish on the company included Renaissance Technologies, Dalton Investments, and Indus Capital.
Judging by the fact that America Movil SAB de CV (NYSE:AMX) has experienced bearish sentiment from the aggregate hedge fund industry, we can see that there was a specific group of money managers that decided to sell off their full holdings in the second quarter. Intriguingly, Ken Griffin's Citadel Investment Group sold off the biggest position of the 750 funds watched by Insider Monkey, comprising about $6.6 million in stock, and Joseph Samuels's Islet Management was right behind this move, as the fund said goodbye to about $2.2 million worth. These bearish behaviors are interesting, as total hedge fund interest was cut by 5 funds in the second quarter.
Let's also examine hedge fund activity in other stocks - not necessarily in the same industry as America Movil SAB de CV (NYSE:AMX) but similarly valued. We will take a look at Suncor Energy Inc. (NYSE:SU), Illinois Tool Works Inc. (NYSE:ITW), Bank of Montreal (NYSE:BMO), and Relx PLC (NYSE:RELX). All of these stocks' market caps resemble AMX's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position SU,32,1296788,-1 ITW,28,306050,1 BMO,13,292499,-2 RELX,3,106280,-4 Average,19,500404,-1.5 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 19 hedge funds with bullish positions and the average amount invested in these stocks was $500 million. That figure was $188 million in AMX's case. Suncor Energy Inc. (NYSE:SU) is the most popular stock in this table. On the other hand Relx PLC (NYSE:RELX) is the least popular one with only 3 bullish hedge fund positions. America Movil SAB de CV (NYSE:AMX) is not the least popular stock in this group but hedge fund interest is still below average. Our calculations showed that top 20 most popular stocks among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. A small number of hedge funds were also right about betting on AMX, though not to the same extent, as the stock returned 3.4% during the third quarter and outperformed the market. Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.