Hedge funds are not perfect. They have their bad picks just like everyone else. Facebook, a stock hedge funds have loved dearly, lost nearly 40% of its value at one point in 2018. Although hedge funds are not perfect, their consensus picks do deliver solid returns, however. Our data show the top 20 S&P 500 stocks among hedge funds beat the S&P 500 Index by nearly 10 percentage points so far in 2019. Because hedge funds have a lot of resources and their consensus picks do well, we pay attention to what they think. In this article, we analyze what the elite funds think of Amphenol Corporation (NYSE:APH).
Is Amphenol Corporation (NYSE:APH) a bargain? Prominent investors are buying. The number of long hedge fund bets moved up by 6 recently. Our calculations also showed that APH isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings). APH was in 31 hedge funds' portfolios at the end of September. There were 25 hedge funds in our database with APH positions at the end of the previous quarter. Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Hedge funds' reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn't keep up with the unhedged returns of the market indices. 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 Russell 2000 ETFs by 40 percentage points since May 2014 (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.
[caption id="attachment_340081" align="aligncenter" width="450"] Phill Gross of Adage Capital Management[/caption]
Unlike the largest US hedge funds that are convinced Dow will soar past 40,000 or the world's most bearish hedge fund that's more convinced than ever that a crash is coming, our long-short investment strategy doesn't rely on bull or bear markets to deliver double digit returns. We only rely on the best performing hedge funds' buy/sell signals. We're going to take a look at the new hedge fund action encompassing Amphenol Corporation (NYSE:APH).
What does smart money think about Amphenol Corporation (NYSE:APH)?
At the end of the third quarter, a total of 31 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 24% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards APH over the last 17 quarters. With hedgies' capital changing hands, there exists a few notable hedge fund managers who were boosting their stakes meaningfully (or already accumulated large positions).
More specifically, Select Equity Group was the largest shareholder of Amphenol Corporation (NYSE:APH), with a stake worth $415.9 million reported as of the end of September. Trailing Select Equity Group was Citadel Investment Group, which amassed a stake valued at $109.9 million. Alyeska Investment Group, Adage Capital Management, and Marshall Wace were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Thames Capital Management allocated the biggest weight to Amphenol Corporation (NYSE:APH), around 3.68% of its portfolio. Select Equity Group is also relatively very bullish on the stock, earmarking 2.81 percent of its 13F equity portfolio to APH.
As aggregate interest increased, some big names were breaking ground themselves. Alyeska Investment Group, managed by Anand Parekh, established the biggest position in Amphenol Corporation (NYSE:APH). Alyeska Investment Group had $77.5 million invested in the company at the end of the quarter. Jay Genzer's Thames Capital Management also made a $12.4 million investment in the stock during the quarter. The other funds with new positions in the stock are Louis Bacon's Moore Global Investments, Michael Kharitonov and Jon David McAuliffe's Voleon Capital, and John Brennan's Sirios Capital Management.
Let's now review hedge fund activity in other stocks - not necessarily in the same industry as Amphenol Corporation (NYSE:APH) but similarly valued. These stocks are Nutrien Ltd. (NYSE:NTR), Alcon Inc. (NYSE:ALC), Canon Inc. (NYSE:CAJ), and Motorola Solutions Inc (NYSE:MSI). This group of stocks' market values resemble APH's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position NTR,25,174521,3 ALC,22,482231,4 CAJ,8,95141,2 MSI,33,932771,8 Average,22,421166,4.25 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 22 hedge funds with bullish positions and the average amount invested in these stocks was $421 million. That figure was $759 million in APH's case. Motorola Solutions Inc (NYSE:MSI) is the most popular stock in this table. On the other hand Canon Inc. (NYSE:CAJ) is the least popular one with only 8 bullish hedge fund positions. Amphenol Corporation (NYSE:APH) is not the most popular stock in this group but hedge fund interest is still above average. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Hedge funds were also right about betting on APH, though not to the same extent, as the stock returned 7.8% during the first two months of the fourth quarter and outperformed the market as well.
Disclosure: None. This article was originally published at Insider Monkey.