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Here’s What Hedge Funds Think About Applied Materials, Inc. (AMAT)

Nina Todic

"Since 2006, value stocks (IVE vs IVW) have underperformed 11 of the 13 calendar years and when they beat growth, it wasn't by much. Cumulatively, through this week, it has been a 122% differential (up 52% for value vs up 174% for growth). This appears to be the longest and most severe drought for value investors since data collection began. It will go our way eventually as there are too many people paying far too much for today's darlings, both public and private. Further, the ten-year yield of 2.5% (pre-tax) isn't attractive nor is real estate. We believe the value part of the global equity market is the only place to earn solid risk adjusted returns and we believe those returns will be higher than normal," said Vilas Fund in its Q1 investor letter. We aren't sure whether value stocks outperform growth, but we follow hedge fund investor letters to understand where the markets and stocks might be going. This article will lay out and discuss the hedge fund and institutional investor sentiment towards Applied Materials, Inc. (NASDAQ:AMAT).

Applied Materials, Inc. (NASDAQ:AMAT) investors should pay attention to an increase in enthusiasm from smart money of late. AMAT was in 42 hedge funds' portfolios at the end of the first quarter of 2019. There were 40 hedge funds in our database with AMAT holdings at the end of the previous quarter. Our calculations also showed that amat isn't among the 30 most popular stocks among hedge funds.

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' 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 30.9% through May 30, 2019. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

[caption id="attachment_30621" align="aligncenter" width="487"] Cliff Asness of AQR Capital Management[/caption]

AQR CAPITAL MANAGEMENT

We're going to take a look at the fresh hedge fund action surrounding Applied Materials, Inc. (NASDAQ:AMAT).

Hedge fund activity in Applied Materials, Inc. (NASDAQ:AMAT)

Heading into the second quarter of 2019, a total of 42 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 5% from one quarter earlier. On the other hand, there were a total of 56 hedge funds with a bullish position in AMAT a year ago. So, let's review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

No of Hedge Funds with AMAT Positions

According to Insider Monkey's hedge fund database, Citadel Investment Group, managed by Ken Griffin, holds the biggest position in Applied Materials, Inc. (NASDAQ:AMAT). Citadel Investment Group has a $358.3 million position in the stock, comprising 0.2% of its 13F portfolio. Sitting at the No. 2 spot is D. E. Shaw of D E Shaw, with a $268.6 million position; 0.3% of its 13F portfolio is allocated to the stock. Remaining hedge funds and institutional investors that hold long positions encompass Cliff Asness's AQR Capital Management, Alex Snow's Lansdowne Partners and Peter Rathjens, Bruce Clarke and John Campbell's Arrowstreet Capital.

With a general bullishness amongst the heavyweights, specific money managers have been driving this bullishness. Soroban Capital Partners, managed by Eric W. Mandelblatt and Gaurav Kapadia, initiated the most valuable position in Applied Materials, Inc. (NASDAQ:AMAT). Soroban Capital Partners had $99.3 million invested in the company at the end of the quarter. David Goel and Paul Ferri's Matrix Capital Management also made a $99.2 million investment in the stock during the quarter. The following funds were also among the new AMAT investors: John Osterweis's Osterweis Capital Management, Kevin Cottrell and Chris LaSusa's KCL Capital, and Dmitry Balyasny's Balyasny Asset Management.

Let's now review hedge fund activity in other stocks - not necessarily in the same industry as Applied Materials, Inc. (NASDAQ:AMAT) but similarly valued. These stocks are Prudential Financial Inc (NYSE:PRU), AFLAC Incorporated (NYSE:AFL), American International Group Inc (NYSE:AIG), and Koninklijke Philips NV (NYSE:PHG). This group of stocks' market caps are closest to AMAT's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position PRU,31,513154,0 AFL,30,737691,3 AIG,37,1792752,-2 PHG,11,158586,-3 Average,27.25,800546,-0.5 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 27.25 hedge funds with bullish positions and the average amount invested in these stocks was $801 million. That figure was $1948 million in AMAT's case. American International Group Inc (NYSE:AIG) is the most popular stock in this table. On the other hand Koninklijke Philips NV (NYSE:PHG) is the least popular one with only 11 bullish hedge fund positions. Compared to these stocks Applied Materials, Inc. (NASDAQ:AMAT) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 1.9% in Q2 through May 30th and outperformed the S&P 500 ETF (SPY) by more than 3 percentage points. Hedge funds were also right about betting on AMAT, though not to the same extent, as the stock returned 0.7% during the same period and outperformed the market as well.

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

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