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At Insider Monkey, we pore over the filings of nearly 817 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 September 30. In this article, we will use that wealth of knowledge to determine whether or not AMETEK, Inc. (NYSE:AME) makes for a good investment right now.
Is AME a good stock to buy? AMETEK, Inc. (NYSE:AME) was in 37 hedge funds' portfolios at the end of the third quarter of 2020. The all time high for this statistic is 40. AME shareholders have witnessed a decrease in enthusiasm from smart money recently. There were 40 hedge funds in our database with AME holdings at the end of June. Our calculations also showed that AME isn't among the 30 most popular stocks among hedge funds (click for Q3 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.
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 113% since March 2017 and outperformed the S&P 500 ETFs by more than 66 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.
Minhua Zhang of Weld Capital Management
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, the House passed a landmark bill decriminalizing marijuana. So, we are checking out this under the radar cannabis stock right now. We go through lists like the 15 best blue chip stocks to buy 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. Now we're going to take a peek at the recent hedge fund action regarding AMETEK, Inc. (NYSE:AME).
Do Hedge Funds Think AME Is A Good Stock To Buy Now?
Heading into the fourth quarter of 2020, a total of 37 of the hedge funds tracked by Insider Monkey were long this stock, a change of -8% from the second quarter of 2020. Below, you can check out the change in hedge fund sentiment towards AME over the last 21 quarters. So, let's find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in AMETEK, Inc. (NYSE:AME) was held by Citadel Investment Group, which reported holding $217.3 million worth of stock at the end of September. It was followed by D E Shaw with a $162.3 million position. Other investors bullish on the company included GAMCO Investors, Giverny Capital, and Adage Capital Management. In terms of the portfolio weights assigned to each position Giverny Capital allocated the biggest weight to AMETEK, Inc. (NYSE:AME), around 6.89% of its 13F portfolio. Jade Capital Advisors is also relatively very bullish on the stock, dishing out 3.01 percent of its 13F equity portfolio to AME.
Because AMETEK, Inc. (NYSE:AME) has witnessed falling interest from the smart money, we can see that there were a few fund managers that slashed their positions entirely last quarter. Intriguingly, Greg Poole's Echo Street Capital Management said goodbye to the largest stake of the "upper crust" of funds tracked by Insider Monkey, valued at an estimated $34.4 million in stock, and Anand Parekh's Alyeska Investment Group was right behind this move, as the fund said goodbye to about $33.6 million worth. These bearish behaviors are interesting, as aggregate hedge fund interest dropped by 3 funds last quarter.
Let's now take a look at hedge fund activity in other stocks similar to AMETEK, Inc. (NYSE:AME). We will take a look at Freeport-McMoRan Inc. (NYSE:FCX), Phillips 66 (NYSE:PSX), TELUS Corporation (NYSE:TU), Nutrien Ltd. (NYSE:NTR), Yum China Holdings, Inc. (NYSE:YUMC), DTE Energy Company (NYSE:DTE), and Kellogg Company (NYSE:K). This group of stocks' market caps are closest to AME's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position FCX,57,1578989,4 PSX,27,203563,-15 TU,12,163923,-3 NTR,26,550380,4 YUMC,39,1096345,4 DTE,28,232166,4 K,35,483978,2 Average,32,615621,0 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 32 hedge funds with bullish positions and the average amount invested in these stocks was $616 million. That figure was $920 million in AME's case. Freeport-McMoRan Inc. (NYSE:FCX) is the most popular stock in this table. On the other hand TELUS Corporation (NYSE:TU) is the least popular one with only 12 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 57.5. 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 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 33.3% in 2020 through December 18th and still beat the market by 16.4 percentage points. Hedge funds were also right about betting on AME as the stock returned 19% since the end of Q3 (through 12/18) 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.