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At Insider Monkey, we pore over the filings of nearly 866 top investment firms every quarter, a process we have now completed for the latest reporting period. The data we've gathered as a result gives us access to a wealth of collective knowledge based on these firms' portfolio holdings as of March 31st. In this article, we will use that wealth of knowledge to determine whether or not AECOM (NYSE:ACM) makes for a good investment right now.
Is AECOM (NYSE:ACM) worth your attention right now? Investors who are in the know were getting more optimistic. The number of bullish hedge fund bets rose by 1 recently. AECOM (NYSE:ACM) was in 38 hedge funds' portfolios at the end of the first quarter of 2021. The all time high for this statistic is 39. Our calculations also showed that ACM isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings).
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 115 percentage points since March 2017 (see the details here). We have been able to outperform the passive index funds by tracking the moves of corporate insiders and hedge funds, and we believe small investors can benefit a lot from reading hedge fund investor letters and 13F filings.
Jeffrey Smith of Starboard Value LP
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. We go through lists like the 10 best battery stocks to pick the next Tesla that will deliver a 10x return. 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 homepage. With all of this in mind let's take a peek at the key hedge fund action surrounding AECOM (NYSE:ACM).
Do Hedge Funds Think ACM Is A Good Stock To Buy Now?
At the end of the first quarter, a total of 38 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 3% from the previous quarter. The graph below displays the number of hedge funds with bullish position in ACM over the last 23 quarters. So, let's review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Starboard Value LP held the most valuable stake in AECOM (NYSE:ACM), which was worth $500.8 million at the end of the fourth quarter. On the second spot was Citadel Investment Group which amassed $86.1 million worth of shares. Islet Management, Owl Creek Asset Management, and TOMS Capital 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 Starboard Value LP allocated the biggest weight to AECOM (NYSE:ACM), around 10.69% of its 13F portfolio. Luminus Management is also relatively very bullish on the stock, designating 6.26 percent of its 13F equity portfolio to ACM.
As aggregate interest increased, key money managers were breaking ground themselves. Owl Creek Asset Management, managed by Jeffrey Altman, created the biggest position in AECOM (NYSE:ACM). Owl Creek Asset Management had $55.9 million invested in the company at the end of the quarter. Benjamin Pass's TOMS Capital also initiated a $43.7 million position during the quarter. The following funds were also among the new ACM investors: Louis Bacon's Moore Global Investments, Zach Schreiber's Point State Capital, and Andrew Sandler's Sandler Capital Management.
Let's now take a look at hedge fund activity in other stocks - not necessarily in the same industry as AECOM (NYSE:ACM) but similarly valued. We will take a look at Continental Resources, Inc. (NYSE:CLR), NiSource Inc. (NYSE:NI), Kohl's Corporation (NYSE:KSS), Appian Corporation (NASDAQ:APPN), First Horizon Corporation (NYSE:FHN), AptarGroup, Inc. (NYSE:ATR), and Deckers Outdoor Corp (NYSE:DECK). This group of stocks' market values match ACM's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position CLR,23,154016,-6 NI,28,268051,5 KSS,35,1417821,-5 APPN,24,914428,0 FHN,27,312101,-3 ATR,20,259991,0 DECK,40,922422,-5 Average,28.1,606976,-2 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 28.1 hedge funds with bullish positions and the average amount invested in these stocks was $607 million. That figure was $1005 million in ACM's case. Deckers Outdoor Corp (NYSE:DECK) is the most popular stock in this table. On the other hand AptarGroup, Inc. (NYSE:ATR) is the least popular one with only 20 bullish hedge fund positions. AECOM (NYSE:ACM) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for ACM is 80.2. 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 positive signal but we'd rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 19.3% in 2021 through June 25th and beat the market again by 4.8 percentage points. Unfortunately ACM wasn't nearly as popular as these 5 stocks and hedge funds that were betting on ACM were disappointed as the stock returned -0.3% since the end of March (through 6/25) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as many of these stocks already outperformed the market since 2019.
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Disclosure: None. This article was originally published at Insider Monkey.