At Insider Monkey we track the activity of some of the best-performing hedge funds like Appaloosa Management, Baupost, and Third Point because we determined that some of the stocks that they are collectively bullish on can help us generate returns above the broader indices. Out of thousands of stocks that hedge funds invest in, small-caps can provide the best returns over the long term due to the fact that these companies are less efficiently priced and are usually under the radars of mass-media, analysts and dumb money. This is why we follow the smart money moves in the small-cap space.
Is American Tower Corporation (NYSE:AMT) a bargain? Investors who are in the know are in an optimistic mood. The number of long hedge fund bets moved up by 3 recently. Our calculations also showed that AMT isn't among the 30 most popular stocks among hedge funds. AMT was in 42 hedge funds' portfolios at the end of the third quarter of 2018. There were 39 hedge funds in our database with AMT positions 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 18 percentage points since May 2014 through December 3, 2018 (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.
We're going to review the latest hedge fund action regarding American Tower Corporation (NYSE:AMT).
How are hedge funds trading American Tower Corporation (NYSE:AMT)?
At the end of the third quarter, a total of 42 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 8% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards AMT over the last 13 quarters. So, let's review 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, Charles Akre's Akre Capital Management has the biggest position in American Tower Corporation (NYSE:AMT), worth close to $1.027 billion, corresponding to 12% of its total 13F portfolio. The second most bullish fund manager is Renaissance Technologies, led by Jim Simons, holding a $433.4 million position; the fund has 0.4% of its 13F portfolio invested in the stock. Other members of the smart money that are bullish comprise William von Mueffling's Cantillon Capital Management, William von Mueffling's Cantillon Capital Management and PVH's Alkeon Capital Management.
With a general bullishness amongst the heavyweights, some big names were breaking ground themselves. Point72 Asset Management, managed by Steve Cohen, established the largest position in American Tower Corporation (NYSE:AMT). Point72 Asset Management had $39.6 million invested in the company at the end of the quarter. Richard Driehaus's Driehaus Capital also made a $5.7 million investment in the stock during the quarter. The following funds were also among the new AMT investors: Brad Dunkley and Blair Levinsky's Waratah Capital Advisors, Alec Litowitz and Ross Laser's Magnetar Capital, and Peter Rathjens, Bruce Clarke and John Campbell's Arrowstreet Capital.
Let's also examine hedge fund activity in other stocks similar to American Tower Corporation (NYSE:AMT). We will take a look at VMware, Inc. (NYSE:VMW), CSX Corporation (NYSE:CSX), FedEx Corporation (NYSE:FDX), and Activision Blizzard, Inc. (NASDAQ:ATVI). All of these stocks' market caps resemble AMT's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position VMW,38,2366199,1 CSX,54,6677253,2 FDX,42,3460281,-1 ATVI,74,5781502,8 Average,52,4571309,2.5 [/table]
As you can see these stocks had an average of 52 hedge funds with bullish positions and the average amount invested in these stocks was $4.57 billion. That figure was $2.91 billion in AMT's case. Activision Blizzard, Inc. (NASDAQ:ATVI) is the most popular stock in this table. On the other hand VMware, Inc. (NYSE:VMW) is the least popular one with only 38 bullish hedge fund positions. American Tower Corporation (NYSE:AMT) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we'd rather spend our time researching stocks that hedge funds are piling on. In this regard ATVI might be a better candidate to consider a long position.
Disclosure: None. This article was originally published at Insider Monkey.