Insider Monkey has processed numerous 13F filings of hedge funds and successful value investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds' and successful investors' positions as of the end of the first quarter. You can find articles about an individual hedge fund's trades on numerous financial news websites. However, in this article we will take a look at their collective moves over the last 4.5 years and analyze what the smart money thinks of Archer Daniels Midland Company (NYSE:ADM) based on that data.
Archer Daniels Midland Company (NYSE:ADM) has seen an increase in enthusiasm from smart money recently. ADM was in 32 hedge funds' portfolios at the end of March. There were 28 hedge funds in our database with ADM positions at the end of the previous quarter. Our calculations also showed that ADM isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks). Video: Watch our video about the top 5 most popular hedge fund stocks.
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 was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 51 percentage points since March 2017 (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 36% through May 18th. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
[caption id="attachment_728376" align="aligncenter" width="399"] Jonathan Barrett of Luminus Management[/caption]
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, 2020's unprecedented market conditions provide us with the highest number of trading opportunities in a decade. So we are checking out trades like this one. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Now we're going to take a gander at the new hedge fund action regarding Archer Daniels Midland Company (NYSE:ADM).
What have hedge funds been doing with Archer Daniels Midland Company (NYSE:ADM)?
Heading into the second quarter of 2020, a total of 32 of the hedge funds tracked by Insider Monkey were long this stock, a change of 14% from the fourth quarter of 2019. Below, you can check out the change in hedge fund sentiment towards ADM over the last 18 quarters. With the smart money's sentiment swirling, there exists a few notable hedge fund managers who were upping their stakes substantially (or already accumulated large positions).
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Diamond Hill Capital, managed by Ric Dillon, holds the number one position in Archer Daniels Midland Company (NYSE:ADM). Diamond Hill Capital has a $167.4 million position in the stock, comprising 1.1% of its 13F portfolio. On Diamond Hill Capital's heels is John Murphy of Levin Easterly Partners, with a $101.2 million position; the fund has 4.5% of its 13F portfolio invested in the stock. Some other members of the smart money that are bullish contain Tom Gayner's Markel Gayner Asset Management, Peter Rathjens, Bruce Clarke and John Campbell's Arrowstreet Capital and Ken Griffin's Citadel Investment Group. In terms of the portfolio weights assigned to each position Levin Easterly Partners allocated the biggest weight to Archer Daniels Midland Company (NYSE:ADM), around 4.49% of its 13F portfolio. Centenus Global Management is also relatively very bullish on the stock, dishing out 1.61 percent of its 13F equity portfolio to ADM.
As aggregate interest increased, key money managers have been driving this bullishness. Arrowstreet Capital, managed by Peter Rathjens, Bruce Clarke and John Campbell, initiated the largest position in Archer Daniels Midland Company (NYSE:ADM). Arrowstreet Capital had $51.1 million invested in the company at the end of the quarter. Thomas E. Claugus's GMT Capital also made a $11 million investment in the stock during the quarter. The other funds with new positions in the stock are Jonathan Barrett and Paul Segal's Luminus Management, Michael Gelband's ExodusPoint Capital, and Steve Cohen's Point72 Asset Management.
Let's now take a look at hedge fund activity in other stocks - not necessarily in the same industry as Archer Daniels Midland Company (NYSE:ADM) but similarly valued. These stocks are Ecopetrol S.A. (NYSE:EC), Liberty Broadband Corp (NASDAQ:LBRDA), Nutrien Ltd. (NYSE:NTR), and Xilinx, Inc. (NASDAQ:XLNX). All of these stocks' market caps resemble ADM's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position EC,12,107803,1 LBRDA,26,655556,2 NTR,22,269579,-6 XLNX,38,635591,-4 Average,24.5,417132,-1.75 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 24.5 hedge funds with bullish positions and the average amount invested in these stocks was $417 million. That figure was $564 million in ADM's case. Xilinx, Inc. (NASDAQ:XLNX) is the most popular stock in this table. On the other hand Ecopetrol S.A. (NYSE:EC) is the least popular one with only 12 bullish hedge fund positions. Archer Daniels Midland Company (NYSE:ADM) 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 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 8.3% in 2020 through the end of May but beat the market by 13.2 percentage points. Unfortunately ADM wasn't nearly as popular as these 10 stocks and hedge funds that were betting on ADM were disappointed as the stock returned 12.9% during the same time period and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.
Disclosure: None. This article was originally published at Insider Monkey.