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Was The Smart Money Right About American Tower (AMT)?

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In this article you are going to find out whether hedge funds think American Tower Corporation (NYSE:AMT) is a good investment 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 Tower Corporation (NYSE:AMT) going to take off soon? Hedge funds were reducing their bets on the stock. The number of long hedge fund positions decreased by 1 in recent months. American Tower Corporation (NYSE:AMT) was in 61 hedge funds' portfolios at the end of the fourth quarter of 2020. The all time high for this statistic is 62. Our calculations also showed that AMT isn't among the 30 most popular stocks among hedge funds (click for Q4 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 124 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.

William Von Mueffling - Cantillon Capital Management
William Von Mueffling - Cantillon Capital Management

William Von Mueffling of Cantillon Capital Management

At Insider Monkey we leave no stone unturned when looking for 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 hydrogen fuel cell 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 go over the new hedge fund action encompassing American Tower Corporation (NYSE:AMT).

Do Hedge Funds Think AMT Is A Good Stock To Buy Now?

At Q4's end, a total of 61 of the hedge funds tracked by Insider Monkey were long this stock, a change of -2% from one quarter earlier. By comparison, 46 hedge funds held shares or bullish call options in AMT a year ago. With the smart money's capital changing hands, there exists a select group of noteworthy hedge fund managers who were upping their holdings significantly (or already accumulated large positions).

Is AMT A Good Stock To Buy?
Is AMT A Good Stock To Buy?

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Charles Akre's Akre Capital Management has the largest position in American Tower Corporation (NYSE:AMT), worth close to $1.6005 billion, comprising 10.8% of its total 13F portfolio. Coming in second is Cantillon Capital Management, led by William von Mueffling, holding a $463.8 million position; the fund has 3.5% of its 13F portfolio invested in the stock. Other members of the smart money that hold long positions contain D. E. Shaw's D E Shaw, Ken Fisher's Fisher Asset Management and Panayotis Takis Sparaggis's Alkeon Capital Management. In terms of the portfolio weights assigned to each position Akre Capital Management allocated the biggest weight to American Tower Corporation (NYSE:AMT), around 10.82% of its 13F portfolio. Heard Capital is also relatively very bullish on the stock, dishing out 10.24 percent of its 13F equity portfolio to AMT.

Due to the fact that American Tower Corporation (NYSE:AMT) has witnessed bearish sentiment from the entirety of the hedge funds we track, it's easy to see that there was a specific group of money managers that decided to sell off their positions entirely in the fourth quarter. It's worth mentioning that Dmitry Balyasny's Balyasny Asset Management dumped the largest position of all the hedgies monitored by Insider Monkey, totaling about $19.2 million in stock. Steve Cohen's fund, Point72 Asset Management, also said goodbye to its stock, about $13.9 million worth. These bearish behaviors are intriguing to say the least, as aggregate hedge fund interest dropped by 1 funds in the fourth quarter.

Let's also examine hedge fund activity in other stocks similar to American Tower Corporation (NYSE:AMT). We will take a look at The Charles Schwab Corporation (NYSE:SCHW), Lockheed Martin Corporation (NYSE:LMT), Caterpillar Inc. (NYSE:CAT), Square, Inc. (NYSE:SQ), American Express Company (NYSE:AXP), Zoom Video Communications, Inc. (NASDAQ:ZM), and The Estee Lauder Companies Inc (NYSE:EL). This group of stocks' market valuations match AMT's market valuation.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position SCHW,61,4473211,8 LMT,53,2527739,6 CAT,53,4157844,12 SQ,89,8819199,16 AXP,60,21887073,12 ZM,59,6002261,3 EL,51,3593398,5 Average,60.9,7351532,8.9 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 60.9 hedge funds with bullish positions and the average amount invested in these stocks was $7352 million. That figure was $4726 million in AMT's case. Square, Inc. (NYSE:SQ) is the most popular stock in this table. On the other hand The Estee Lauder Companies Inc (NYSE:EL) is the least popular one with only 51 bullish hedge fund positions. American Tower Corporation (NYSE:AMT) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for AMT is 46.7. 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. Our calculations showed that top 10 most popular stocks among hedge funds returned 90.7% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 35 percentage points. These stocks gained 13.6% in 2021 through April 30th and still beat the market by 1.6 percentage points. Hedge funds were also right about betting on AMT as the stock returned 14.1% since the end of Q4 (through 4/30) and outperformed the market. Hedge funds were rewarded for their relative bullishness.

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

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