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Are Hedge Funds Really Bullish About Advanced Micro Devices, Inc. (AMD)?

Nina Todic

Investing in small cap stocks has historically been a way to outperform the market, as small cap companies typically grow faster on average than the blue chips. That outperformance comes with a price, however, as there are occasional periods of higher volatility. The last 12 months is one of those periods, as the Russell 2000 ETF (IWM) has underperformed the larger S&P 500 ETF (SPY) by more than 10 percentage points. Given that the funds we track tend to have a disproportionate amount of their portfolios in smaller cap stocks, they have seen some volatility in their portfolios too. Actually their moves are potentially one of the factors that contributed to this volatility. In this article, we use our extensive database of hedge fund holdings to find out what the smart money thinks of Advanced Micro Devices, Inc. (NASDAQ:AMD).

Advanced Micro Devices, Inc. (NASDAQ:AMD) has experienced an increase in enthusiasm from smart money lately. AMD was in 41 hedge funds' portfolios at the end of the second quarter of 2019. There were 37 hedge funds in our database with AMD holdings at the end of the previous quarter. Our calculations also showed that AMD isn't among the 30 most popular stocks among hedge funds.

In today’s marketplace there are a multitude of indicators stock traders use to value publicly traded companies. A couple of the less known indicators are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the elite fund managers can outperform the S&P 500 by a solid amount (see the details here).

SAC CAPITAL ADVISORS

Unlike some fund managers who are betting on Dow reaching 40000 in a year, our long-short investment strategy doesn't rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. We're going to take a glance at the recent hedge fund action regarding Advanced Micro Devices, Inc. (NASDAQ:AMD).

What does smart money think about Advanced Micro Devices, Inc. (NASDAQ:AMD)?

Heading into the third quarter of 2019, a total of 41 of the hedge funds tracked by Insider Monkey were long this stock, a change of 11% from one quarter earlier. On the other hand, there were a total of 27 hedge funds with a bullish position in AMD a year ago. With hedgies' capital changing hands, there exists a select group of notable hedge fund managers who were adding to their holdings substantially (or already accumulated large positions).

No of Hedge Funds with AMD Positions

Among these funds, Citadel Investment Group held the most valuable stake in Advanced Micro Devices, Inc. (NASDAQ:AMD), which was worth $214.6 million at the end of the second quarter. On the second spot was Polar Capital which amassed $169 million worth of shares. Moreover, Point72 Asset Management, Hitchwood Capital Management, and D E Shaw were also bullish on Advanced Micro Devices, Inc. (NASDAQ:AMD), allocating a large percentage of their portfolios to this stock.

As one would reasonably expect, key hedge funds were breaking ground themselves. Capital Growth Management, managed by Ken Heebner, created the most outsized position in Advanced Micro Devices, Inc. (NASDAQ:AMD). Capital Growth Management had $25.4 million invested in the company at the end of the quarter. Leon Shaulov's Maplelane Capital also initiated a $22.1 million position during the quarter. The other funds with brand new AMD positions are Michael Kharitonov and Jon David McAuliffe's Voleon Capital, Jeffrey Talpins's Element Capital Management, and Andrew Sandler's Sandler Capital Management.

Let's check out hedge fund activity in other stocks similar to Advanced Micro Devices, Inc. (NASDAQ:AMD). We will take a look at China Unicom (Hong Kong) Limited (NYSE:CHU), Valero Energy Corporation (NYSE:VLO), Red Hat, Inc. (NYSE:RHT), and Carnival Corporation & Plc (NYSE:CCL). All of these stocks' market caps match AMD's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position CHU,6,64209,-2 VLO,35,792496,-5 RHT,61,6666536,-5 CCL,36,670965,8 Average,34.5,2048552,-1 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 34.5 hedge funds with bullish positions and the average amount invested in these stocks was $2049 million. That figure was $756 million in AMD's case. Red Hat, Inc. (NYSE:RHT) is the most popular stock in this table. On the other hand China Unicom (Hong Kong) Limited (NYSE:CHU) is the least popular one with only 6 bullish hedge fund positions. Advanced Micro Devices, Inc. (NASDAQ:AMD) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we'd rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 20 most popular stocks among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Unfortunately AMD wasn't nearly as popular as these 20 stocks and hedge funds that were betting on AMD were disappointed as the stock returned -4.5% during 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 20 most popular stocks (see the video below) among hedge funds as many of these stocks already outperformed the market so far this year. Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

5 Most Popular Stocks Among Hedge Funds

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

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