A market correction in the fourth quarter, spurred by a number of global macroeconomic concerns and rising interest rates ended up having a negative impact on the markets and many hedge funds as a result. The stocks of smaller companies were especially hard hit during this time as investors fled to investments seen as being safer. This is evident in the fact that the Russell 2000 ETF underperformed the S&P 500 ETF by nearly 7 percentage points during the fourth quarter. We also received indications that hedge funds were trimming their positions amid the market volatility and uncertainty, and given their greater inclination towards smaller cap stocks than other investors, it follows that a stronger sell-off occurred in those stocks. Let's study the hedge fund sentiment to see how those concerns affected their ownership of AptarGroup, Inc. (NYSE:ATR) during the quarter.
Is AptarGroup, Inc. (NYSE:ATR) worth your attention right now? The smart money is buying. The number of long hedge fund positions moved up by 4 in recent months. Our calculations also showed that ATR 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 32 percentage points since May 2014 through March 12, 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 27.5% through March 12, 2019. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Let's take a gander at the fresh hedge fund action regarding AptarGroup, Inc. (NYSE:ATR).
How have hedgies been trading AptarGroup, Inc. (NYSE:ATR)?
Heading into the first quarter of 2019, a total of 17 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 31% from the second quarter of 2018. On the other hand, there were a total of 14 hedge funds with a bullish position in ATR a year ago. With hedgies' positions undergoing their usual ebb and flow, there exists an "upper tier" of notable hedge fund managers who were upping their holdings substantially (or already accumulated large positions).
More specifically, Royce & Associates was the largest shareholder of AptarGroup, Inc. (NYSE:ATR), with a stake worth $19.9 million reported as of the end of September. Trailing Royce & Associates was Renaissance Technologies, which amassed a stake valued at $18.2 million. Millennium Management, D E Shaw, and GLG Partners were also very fond of the stock, giving the stock large weights in their portfolios.
As one would reasonably expect, some big names have been driving this bullishness. GLG Partners, managed by Noam Gottesman, assembled the most outsized position in AptarGroup, Inc. (NYSE:ATR). GLG Partners had $1.9 million invested in the company at the end of the quarter. Nick Thakore's Diametric Capital also made a $1.7 million investment in the stock during the quarter. The other funds with brand new ATR positions are D. E. Shaw's D E Shaw, Peter Rathjens, Bruce Clarke and John Campbell's Arrowstreet Capital, and Ray Dalio's Bridgewater Associates.
Let's go over hedge fund activity in other stocks similar to AptarGroup, Inc. (NYSE:ATR). These stocks are American Homes 4 Rent (NYSE:AMH), Exelixis, Inc. (NASDAQ:EXEL), Medical Properties Trust, Inc. (NYSE:MPW), and LG Display Co Ltd. (NYSE:LPL). All of these stocks' market caps are similar to ATR's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position AMH,18,430651,-2 EXEL,24,668199,1 MPW,16,224506,6 LPL,5,19245,-1 Average,15.75,335650,1 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 15.75 hedge funds with bullish positions and the average amount invested in these stocks was $336 million. That figure was $63 million in ATR's case. Exelixis, Inc. (NASDAQ:EXEL) is the most popular stock in this table. On the other hand LG Display Co Ltd. (NYSE:LPL) is the least popular one with only 5 bullish hedge fund positions. AptarGroup, Inc. (NYSE:ATR) 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 the top 15 most popular stocks among hedge funds returned 21.3% through April 8th and outperformed the S&P 500 ETF (SPY) by more than 5 percentage points. Hedge funds were also right about betting on ATR, though not to the same extent, as the stock returned 16.3% and outperformed the market as well.
Disclosure: None. This article was originally published at Insider Monkey.