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Was The Smart Money Right About AMETEK, Inc. (AME)?

Abigail Fisher
·5 min read

Our extensive research has shown that imitating the smart money can generate significant returns for retail investors, which is why we track nearly 823 active prominent money managers and analyze their quarterly 13F filings. The stocks that are heavily bought by hedge funds historically outperformed the market, though there is no shortage of high profile failures like hedge funds' 2018 losses in Facebook and Apple. Let’s take a closer look at what the funds we track think about AMETEK, Inc. (NYSE:AME) in this article.

AMETEK, Inc. (NYSE:AME) shareholders have witnessed an increase in support from the world's most elite money managers of late. AMETEK, Inc. (NYSE:AME) was in 40 hedge funds' portfolios at the end of June. The all time high for this statistics is 38. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that AME isn't among the 30 most popular stocks among hedge funds (click for Q2 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.

To the average investor there are a large number of signals stock traders put to use to value stocks. A couple of the best signals are hedge fund and insider trading activity. We have shown that, historically, those who follow the best picks of the elite hedge fund managers can trounce the broader indices by a significant margin (see the details here).

Mario Gabelli of GAMCO Investors

At Insider Monkey we scour multiple sources to uncover 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 most profitable companies in the world to pick the best large-cap stocks to buy. 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 website to get excerpts of these letters in your inbox. With all of this in mind let's go over the new hedge fund action encompassing AMETEK, Inc. (NYSE:AME).

How are hedge funds trading AMETEK, Inc. (NYSE:AME)?

At second quarter's end, a total of 40 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 21% from the first quarter of 2020. By comparison, 31 hedge funds held shares or bullish call options in AME a year ago. With the smart money's sentiment swirling, there exists an "upper tier" of noteworthy hedge fund managers who were upping their stakes substantially (or already accumulated large positions).

Among these funds, Citadel Investment Group held the most valuable stake in AMETEK, Inc. (NYSE:AME), which was worth $255 million at the end of the third quarter. On the second spot was D E Shaw which amassed $136.3 million worth of shares. GAMCO Investors, Millennium Management, and Giverny Capital were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Giverny Capital allocated the biggest weight to AMETEK, Inc. (NYSE:AME), around 6.64% of its 13F portfolio. Jade Capital Advisors is also relatively very bullish on the stock, setting aside 5.05 percent of its 13F equity portfolio to AME.

Consequently, some big names were breaking ground themselves. Southpoint Capital Advisors, managed by John Smith Clark, created the biggest position in AMETEK, Inc. (NYSE:AME). Southpoint Capital Advisors had $53.6 million invested in the company at the end of the quarter. Greg Poole's Echo Street Capital Management also made a $34.4 million investment in the stock during the quarter. The other funds with new positions in the stock are Anand Parekh's Alyeska Investment Group, Louis Bacon's Moore Global Investments, and Parvinder Thiara's Athanor Capital.

Let's check out hedge fund activity in other stocks similar to AMETEK, Inc. (NYSE:AME). These stocks are AmerisourceBergen Corporation (NYSE:ABC), Carvana Co. (NYSE:CVNA), Alexandria Real Estate Equities Inc (NYSE:ARE), Realty Income Corporation (NYSE:O), Hilton Worldwide Holdings Inc (NYSE:HLT), Rogers Communications Inc. (NYSE:RCI), and D.R. Horton, Inc. (NYSE:DHI). This group of stocks' market valuations resemble AME's market valuation.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position ABC,40,646674,-1 CVNA,57,3587877,5 ARE,18,53382,-11 O,17,185310,-8 HLT,53,4467377,10 RCI,16,340545,0 DHI,66,2088308,1 Average,38.1,1624210,-0.6 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 38.1 hedge funds with bullish positions and the average amount invested in these stocks was $1624 million. That figure was $953 million in AME's case. D.R. Horton, Inc. (NYSE:DHI) is the most popular stock in this table. On the other hand Rogers Communications Inc. (NYSE:RCI) is the least popular one with only 16 bullish hedge fund positions. AMETEK, Inc. (NYSE:AME) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for AME is 64. 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 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 23% in 2020 through October 30th and still beat the market by 20.1 percentage points. Hedge funds were also right about betting on AME as the stock returned 10.1% since the end of Q2 (through 10/30) 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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