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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 (see why hell is coming). 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 Anterix Inc. (NASDAQ:ATEX) at the end of the first quarter and determine whether the smart money was really smart about this stock.
Anterix Inc. (NASDAQ:ATEX) shareholders have witnessed a decrease in support from the world's most elite money managers recently. Our calculations also showed that ATEX 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.
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 S&P 500 ETFs by more than 58 percentage points since March 2017 (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 stocks that are in our short portfolio.
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Donald Sussman of Paloma Partners[/caption]
At Insider Monkey we scour multiple sources to uncover the next great investment idea. There is a lot of volatility in the markets and this presents amazing investment opportunities from time to time. For example, this trader claims to deliver juiced up returns with one trade a week, so we are checking out his highest conviction idea. A second trader claims to score lucrative profits by utilizing a "weekend trading strategy", so we look into his strategy's picks. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We recently recommended several stocks partly inspired by legendary Bill Miller's investor letter. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 in February after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind let's analyze the latest hedge fund action regarding Anterix Inc. (NASDAQ:ATEX).
How have hedgies been trading Anterix Inc. (NASDAQ:ATEX)?
At the end of the first quarter, a total of 11 of the hedge funds tracked by Insider Monkey were long this stock, a change of -8% from the fourth quarter of 2019. On the other hand, there were a total of 13 hedge funds with a bullish position in ATEX a year ago. With hedge funds' capital changing hands, there exists a select group of notable hedge fund managers who were increasing their holdings substantially (or already accumulated large positions).
The largest stake in Anterix Inc. (NASDAQ:ATEX) was held by Owl Creek Asset Management, which reported holding $229.2 million worth of stock at the end of September. It was followed by Lomas Capital Management with a $68.6 million position. Other investors bullish on the company included Cerberus Capital Management, Hudson Bay Capital Management, and Hawk Ridge Management. In terms of the portfolio weights assigned to each position Owl Creek Asset Management allocated the biggest weight to Anterix Inc. (NASDAQ:ATEX), around 18.22% of its 13F portfolio. Cerberus Capital Management is also relatively very bullish on the stock, earmarking 10.32 percent of its 13F equity portfolio to ATEX.
Because Anterix Inc. (NASDAQ:ATEX) has experienced bearish sentiment from hedge fund managers, it's easy to see that there exists a select few funds that elected to cut their positions entirely last quarter. At the top of the heap, C. Jonathan Gattman's Cloverdale Capital Management sold off the biggest position of all the hedgies tracked by Insider Monkey, worth close to $2.9 million in stock, and Jody LaNasa's Serengeti Asset Management was right behind this move, as the fund cut about $1.3 million worth. These transactions are interesting, as aggregate hedge fund interest was cut by 1 funds last quarter.
Let's now take a look at hedge fund activity in other stocks similar to Anterix Inc. (NASDAQ:ATEX). We will take a look at Natus Medical Inc (NASDAQ:NTUS), FARO Technologies, Inc. (NASDAQ:FARO), Hollysys Automation Technologies Ltd (NASDAQ:HOLI), and Golar LNG Limited (NASDAQ:GLNG). All of these stocks' market caps are closest to ATEX's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position NTUS,23,72047,-1 FARO,12,112398,0 HOLI,12,41739,0 GLNG,10,153667,-9 Average,14.25,94963,-2.5 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 14.25 hedge funds with bullish positions and the average amount invested in these stocks was $95 million. That figure was $415 million in ATEX's case. Natus Medical Inc (NASDAQ:NTUS) is the most popular stock in this table. On the other hand Golar LNG Limited (NASDAQ:GLNG) is the least popular one with only 10 bullish hedge fund positions. Anterix Inc. (NASDAQ:ATEX) 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. 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 12.3% in 2020 through June 30th and surpassed the market by 15.5 percentage points. Unfortunately ATEX wasn't nearly as popular as these 10 stocks (hedge fund sentiment was quite bearish); ATEX investors were disappointed as the stock returned -0.7% during the second quarter and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.
Disclosure: None. This article was originally published at Insider Monkey.