The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We at Insider Monkey have plowed through 823 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds' and investors' portfolio positions as of June 30th, when the S&P 500 Index was trading around the 3100 level. Stocks kept going up since then. In this article we look at how hedge funds traded ABM Industries, Inc. (NYSE:ABM) and determine whether the smart money was really smart about this stock.
ABM Industries, Inc. (NYSE:ABM) shareholders have witnessed an increase in enthusiasm from smart money lately. ABM Industries, Inc. (NYSE:ABM) was in 21 hedge funds' portfolios at the end of June. The all time high for this statistics is 20. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. There were 18 hedge funds in our database with ABM holdings at the end of March. Our calculations also showed that ABM isn't among the 30 most popular stocks among hedge funds (click for Q2 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.
Today there are tons of metrics stock traders use to value stocks. Two of the less known metrics are hedge fund and insider trading interest. Our researchers have shown that, historically, those who follow the best picks of the top investment managers can trounce the market by a very impressive margin (see the details here).
Richard Driehaus of Driehaus Capital
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost precious metals prices. So, we are checking out this junior gold mining stock. We are also checking out this lithium company which could benefit from the electric car adoption. We go through lists like the 10 most profitable companies in the world to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our website to get excerpts of these letters in your inbox. With all of this in mind we're going to analyze the key hedge fund action regarding ABM Industries, Inc. (NYSE:ABM).
What does smart money think about ABM Industries, Inc. (NYSE:ABM)?
At second quarter's end, a total of 21 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 17% from the first quarter of 2020. By comparison, 10 hedge funds held shares or bullish call options in ABM a year ago. With hedge funds' positions undergoing their usual ebb and flow, there exists a select group of key hedge fund managers who were increasing their stakes significantly (or already accumulated large positions).
The largest stake in ABM Industries, Inc. (NYSE:ABM) was held by Royce & Associates, which reported holding $17.7 million worth of stock at the end of September. It was followed by Arrowstreet Capital with a $7.8 million position. Other investors bullish on the company included Pura Vida Investments, BeaconLight Capital, and Driehaus Capital. In terms of the portfolio weights assigned to each position BeaconLight Capital allocated the biggest weight to ABM Industries, Inc. (NYSE:ABM), around 1.38% of its 13F portfolio. Pura Vida Investments is also relatively very bullish on the stock, earmarking 0.9 percent of its 13F equity portfolio to ABM.
As industrywide interest jumped, key hedge funds were leading the bulls' herd. Pura Vida Investments, managed by Efrem Kamen, established the most outsized position in ABM Industries, Inc. (NYSE:ABM). Pura Vida Investments had $4.8 million invested in the company at the end of the quarter. Ed Bosek's BeaconLight Capital also initiated a $4.1 million position during the quarter. The other funds with brand new ABM positions are Richard Driehaus's Driehaus Capital, Ryan Tolkin (CIO)'s Schonfeld Strategic Advisors, and Qing Li's Sciencast Management.
Let's now review hedge fund activity in other stocks similar to ABM Industries, Inc. (NYSE:ABM). These stocks are Applied Industrial Technologies Inc (NYSE:AIT), Builders FirstSource, Inc. (NASDAQ:BLDR), Kodiak Sciences Inc (NASDAQ:KOD), J&J Snack Foods Corp. (NASDAQ:JJSF), Integer Holdings Corporation (NYSE:ITGR), Wyndham Destinations, Inc. (NYSE:WYND), and IBERIABANK Corporation (NASDAQ:IBKC). This group of stocks' market valuations resemble ABM's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position AIT,15,29147,1 BLDR,32,456822,3 KOD,20,861824,8 JJSF,17,70981,0 ITGR,17,87073,-3 WYND,34,434802,9 IBKC,26,201604,-4 Average,23,306036,2 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 23 hedge funds with bullish positions and the average amount invested in these stocks was $306 million. That figure was $50 million in ABM's case. Wyndham Destinations, Inc. (NYSE:WYND) is the most popular stock in this table. On the other hand Applied Industrial Technologies Inc (NYSE:AIT) is the least popular one with only 15 bullish hedge fund positions. ABM Industries, Inc. (NYSE:ABM) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for ABM is 53.8. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. 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 24.8% in 2020 through the end of September and surpassed the market by 19.3 percentage points. Unfortunately ABM wasn't nearly as popular as these 10 stocks (hedge fund sentiment was quite bearish); ABM investors were disappointed as the stock returned 2% in the third 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.
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Disclosure: None. This article was originally published at Insider Monkey.