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Do Hedge Funds Love Aramark (NYSE:ARMK)?

Abigail Fisher

We know that hedge funds generate strong, risk-adjusted returns over the long run, therefore imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, smart money investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn't mean that they don't have occasional colossal losses; they do (like Peltz's recent General Electric losses). However, it is still good idea to keep an eye on hedge fund activity. With this in mind, as the current round of 13F filings has just ended, let’s examine the smart money sentiment towards Aramark (NYSE:ARMK).

Is Aramark (NYSE:ARMK) the right pick for your portfolio? Money managers are turning bullish. The number of long hedge fund bets improved by 8 lately. Our calculations also showed that ARMK isn't among the 30 most popular stocks among hedge funds.

In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey's flagship best performing hedge funds strategy returned 6.3% year to date (through December 3rd) and outperformed the market even though it draws its stock picks among small-cap stocks. This strategy also outperformed the market by 18 percentage points since its inception (see the details here). That's why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

GLENVIEW CAPITAL

Let's review the fresh hedge fund action regarding Aramark (NYSE:ARMK).

What does the smart money think about Aramark (NYSE:ARMK)?

At the end of the third quarter, a total of 35 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 30% from the second quarter of 2018. On the other hand, there were a total of 22 hedge funds with a bullish position in ARMK at the beginning of this year. So, let's see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

ARMK_dec2018

More specifically, Kensico Capital was the largest shareholder of Aramark (NYSE:ARMK), with a stake worth $380.9 million reported as of the end of September. Trailing Kensico Capital was Glenview Capital, which amassed a stake valued at $359.3 million. Millennium Management, Point72 Asset Management, and D E Shaw were also very fond of the stock, giving the stock large weights in their portfolios.

With a general bullishness amongst the heavyweights, some big names have been driving this bullishness. Junto Capital Management, managed by James Parsons, established the most outsized position in Aramark (NYSE:ARMK). Junto Capital Management had $37.1 million invested in the company at the end of the quarter. Gregg Moskowitz's Interval Partners also initiated a $12.9 million position during the quarter. The following funds were also among the new ARMK investors: Clint Carlson's Carlson Capital, Greg Poole's Echo Street Capital Management, and William Hyatt's Hudson Way Capital Management.

Let's go over hedge fund activity in other stocks - not necessarily in the same industry as Aramark (NYSE:ARMK) but similarly valued. We will take a look at Nektar Therapeutics (NASDAQ:NKTR), Atmos Energy Corporation (NYSE:ATO), Tata Motors Limited (NYSE:TTM), and Leidos Holdings Inc (NYSE:LDOS). This group of stocks' market caps match ARMK's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position NKTR,27,417833,3 ATO,15,168216,-2 TTM,9,120349,-3 LDOS,27,472777,0 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 19.5 hedge funds with bullish positions and the average amount invested in these stocks was $295 million. That figure was $1552 million in ARMK's case. Nektar Therapeutics (NASDAQ:NKTR) is the most popular stock in this table. On the other hand Tata Motors Limited (NYSE:TTM) is the least popular one with only 9 bullish hedge fund positions. Compared to these stocks Aramark (NYSE:ARMK) is more popular among hedge funds. Considering that hedge funds are fond of this stock in relation to its market cap peers, it may be a good idea to analyze it in detail and potentially include it in your portfolio.

Disclosure: None. This article was originally published at Insider Monkey.

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