Is American Woodmark Corporation (NASDAQ:AMWD) a good equity to bet on right now? We like to check what the smart money thinks first before doing extensive research on a given stock. Although there have been several high profile failed hedge fund picks, the consensus picks among hedge fund investors have historically outperformed the market after adjusting for known risk attributes. It's not surprising given that hedge funds have access to better information and more resources to predict the winners in the stock market.
Is American Woodmark Corporation (NASDAQ:AMWD) an exceptional investment right now? The best stock pickers are becoming less confident. The number of bullish hedge fund positions fell by 3 in recent months. Our calculations also showed that AMWD isn't among the 30 most popular stocks among hedge funds (see the video below). AMWD was in 9 hedge funds' portfolios at the end of June. There were 12 hedge funds in our database with AMWD holdings at the end of the previous quarter. Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that hedge funds' large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the market by 40 percentage points since May 2014 through May 30, 2019 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that'll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 25.7% through September 30, 2019. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Unlike former hedge manager, Dr. Steve Sjuggerud, who is convinced Dow will soar past 40000, 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 go over the latest hedge fund action surrounding American Woodmark Corporation (NASDAQ:AMWD).
What have hedge funds been doing with American Woodmark Corporation (NASDAQ:AMWD)?
At Q2's end, a total of 9 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -25% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards AMWD over the last 16 quarters. With the smart money's sentiment swirling, there exists an "upper tier" of noteworthy hedge fund managers who were increasing their stakes substantially (or already accumulated large positions).
Among these funds, Royce & Associates held the most valuable stake in American Woodmark Corporation (NASDAQ:AMWD), which was worth $13.3 million at the end of the second quarter. On the second spot was Islet Management which amassed $11.6 million worth of shares. Moreover, Citadel Investment Group, Tudor Investment Corp, and Gotham Asset Management were also bullish on American Woodmark Corporation (NASDAQ:AMWD), allocating a large percentage of their portfolios to this stock.
Judging by the fact that American Woodmark Corporation (NASDAQ:AMWD) has experienced bearish sentiment from the entirety of the hedge funds we track, it's safe to say that there were a few hedge funds who were dropping their entire stakes by the end of the second quarter. Intriguingly, Richard Driehaus's Driehaus Capital said goodbye to the biggest stake of the "upper crust" of funds followed by Insider Monkey, valued at an estimated $11.6 million in stock, and Steve Cohen's Point72 Asset Management was right behind this move, as the fund dropped about $7.9 million worth. These moves are intriguing to say the least, as aggregate hedge fund interest dropped by 3 funds by the end of the second quarter.
Let's now review hedge fund activity in other stocks similar to American Woodmark Corporation (NASDAQ:AMWD). We will take a look at Cavco Industries, Inc. (NASDAQ:CVCO), Cars.com Inc. (NYSE:CARS), Ra Pharmaceuticals, Inc. (NASDAQ:RARX), and The Liberty Braves Group (NASDAQ:BATRK). This group of stocks' market caps match AMWD's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position CVCO,16,135968,-3 CARS,29,323559,2 RARX,18,367537,-2 BATRK,23,332871,-5 Average,21.5,289984,-2 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 21.5 hedge funds with bullish positions and the average amount invested in these stocks was $290 million. That figure was $36 million in AMWD's case. Cars.com Inc. (NYSE:CARS) is the most popular stock in this table. On the other hand Cavco Industries, Inc. (NASDAQ:CVCO) is the least popular one with only 16 bullish hedge fund positions. Compared to these stocks American Woodmark Corporation (NASDAQ:AMWD) is even less popular than CVCO. 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. A small number of hedge funds were also right about betting on AMWD, though not to the same extent, as the stock returned 5.1% during the third quarter and outperformed the market as well.
Disclosure: None. This article was originally published at Insider Monkey.