Was The Smart Money Right About Piling Into Advanced Micro Devices (AMD)?
At Insider Monkey, we pore over the filings of nearly 887 top investment firms every quarter, a process we have now completed for the latest reporting period. The data we've gathered as a result gives us access to a wealth of collective knowledge based on these firms' portfolio holdings as of December 31st. In this article, we will use that wealth of knowledge to determine whether or not Advanced Micro Devices, Inc. (NASDAQ:AMD) makes for a good investment right now.
Advanced Micro Devices, Inc. (NASDAQ:AMD) investors should be aware of an increase in activity from the world's largest hedge funds of late. Advanced Micro Devices, Inc. (NASDAQ:AMD) was in 74 hedge funds' portfolios at the end of the fourth quarter of 2020. The all time high for this statistic was previously 71. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. There were 71 hedge funds in our database with AMD holdings at the end of September. Our calculations also showed that AMD isn't among the 30 most popular stocks among hedge funds (click for Q4 rankings).
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey's monthly stock picks returned 197% since March 2017 and outperformed the S&P 500 ETFs by more than 124 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That's why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
Peter Rathjens of Arrowstreet Capital
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, auto parts business is a recession resistant business, so we are taking a closer look at this discount auto parts stock that is growing at a 196% annualized rate. We go through lists like the 15 best micro-cap stocks to buy now to identify the next stock with 10x upside potential. 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. With all of this in mind let's review the recent hedge fund action encompassing Advanced Micro Devices, Inc. (NASDAQ:AMD).
Do Hedge Funds Think AMD Is A Good Stock To Buy Now?
Heading into the first quarter of 2021, a total of 74 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 4% from the third quarter of 2020. The graph below displays the number of hedge funds with bullish position in AMD over the last 22 quarters. With hedgies' capital changing hands, there exists a select group of key hedge fund managers who were upping their stakes substantially (or already accumulated large positions).
More specifically, Arrowstreet Capital was the largest shareholder of Advanced Micro Devices, Inc. (NASDAQ:AMD), with a stake worth $944.1 million reported as of the end of December. Trailing Arrowstreet Capital was Fisher Asset Management, which amassed a stake valued at $842.2 million. D E Shaw, GQG Partners, and Viking Global 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 Andar Capital allocated the biggest weight to Advanced Micro Devices, Inc. (NASDAQ:AMD), around 13.23% of its 13F portfolio. Sylebra Capital Management is also relatively very bullish on the stock, designating 9.14 percent of its 13F equity portfolio to AMD.
With a general bullishness amongst the heavyweights, some big names were breaking ground themselves. Palestra Capital Management, managed by Andrew Immerman and Jeremy Schiffman, created the most valuable position in Advanced Micro Devices, Inc. (NASDAQ:AMD). Palestra Capital Management had $153 million invested in the company at the end of the quarter. David Fiszel's Honeycomb Asset Management also initiated a $48.6 million position during the quarter. The other funds with brand new AMD positions are Wen Han Li's Andar Capital, Frank Fu's CaaS Capital, and Mario Gabelli's GAMCO Investors.
Let's now take a look at hedge fund activity in other stocks - not necessarily in the same industry as Advanced Micro Devices, Inc. (NASDAQ:AMD) but similarly valued. These stocks are TOTAL SE (NYSE:TOT), BlackRock, Inc. (NYSE:BLK), Raytheon Technologies Corp (NYSE:RTX), ServiceNow Inc (NYSE:NOW), HSBC Holdings plc (NYSE:HSBC), Intuit Inc. (NASDAQ:INTU), and The Toronto-Dominion Bank (NYSE:TD). All of these stocks' market caps match AMD's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position TOT,14,980330,-4 BLK,53,1155646,14 RTX,59,2728602,4 NOW,96,6849288,14 HSBC,14,330089,4 INTU,68,4693235,14 TD,22,171021,7 Average,46.6,2415459,7.6 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 46.6 hedge funds with bullish positions and the average amount invested in these stocks was $2415 million. That figure was $6689 million in AMD's case. ServiceNow Inc (NYSE:NOW) is the most popular stock in this table. On the other hand TOTAL SE (NYSE:TOT) is the least popular one with only 14 bullish hedge fund positions. Advanced Micro Devices, Inc. (NASDAQ:AMD) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for AMD is 74.6. 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. 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 30 most popular stocks among hedge funds returned 81.2% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 26 percentage points. These stocks gained 12.3% in 2021 through April 19th and beat the market again by 0.9 percentage points. Unfortunately AMD wasn't nearly as popular as these 30 stocks and hedge funds that were betting on AMD were disappointed as the stock returned -11.6% since the end of December (through 4/19) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 30 most popular stocks among hedge funds as many of these stocks already outperformed the market since 2019.
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Disclosure: None. This article was originally published at Insider Monkey.
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