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Were Hedge Funds Right About Amcor plc (AMCR)?

Asma UL Husna
·6 min read

Hedge funds don't get the respect they used to get. Nowadays investors prefer passive funds over actively managed funds. One thing they don't realize is that 100% of the passive funds didn't see the coronavirus recession coming, but a lot of hedge funds did. Even we published an article near the end of February and predicted a US recession. Think about all the losses you could have avoided if you sold your shares in February and bought them back at the end of March. In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. Keeping this in mind, let's analyze whether Amcor plc (NYSE:AMCR) is a good investment right now by following the lead of some of the best investors in the world and piggybacking their ideas.

Amcor plc (NYSE:AMCR) has experienced a decrease in support from the world's most elite money managers lately. Our calculations also showed that AMCR isn't among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of this article for Q3 rankings).

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by more than 41 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 35.3% through March 3rd. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

[caption id="attachment_340081" align="aligncenter" width="397"] Phill Gross of Adage Capital Management[/caption]

We leave no stone unturned when looking for the next great investment idea. For example, this investor can predict short term winners following earnings announcements with 77% accuracy, so we check out his stock picks. A former hedge fund manager is pitching the "next Amazon" in this video; again we are listening. 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 S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind let's review the new hedge fund action surrounding Amcor plc (NYSE:AMCR).

How have hedgies been trading Amcor plc (NYSE:AMCR)?

At Q4's end, a total of 10 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -41% from the third quarter of 2019. Below, you can check out the change in hedge fund sentiment towards AMCR over the last 18 quarters. So, let's review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

The largest stake in Amcor plc (NYSE:AMCR) was held by Adage Capital Management, which reported holding $20.2 million worth of stock at the end of September. It was followed by Citadel Investment Group with a $9 million position. Other investors bullish on the company included Echo Street Capital Management, D E Shaw, and Cognios Capital. In terms of the portfolio weights assigned to each position Cognios Capital allocated the biggest weight to Amcor plc (NYSE:AMCR), around 0.72% of its 13F portfolio. Echo Street Capital Management is also relatively very bullish on the stock, setting aside 0.13 percent of its 13F equity portfolio to AMCR.

Due to the fact that Amcor plc (NYSE:AMCR) has faced declining sentiment from the entirety of the hedge funds we track, we can see that there were a few funds who were dropping their positions entirely by the end of the third quarter. Interestingly, Israel Englander's Millennium Management sold off the biggest stake of the "upper crust" of funds monitored by Insider Monkey, worth an estimated $33 million in stock, and Donald Sussman's Paloma Partners was right behind this move, as the fund dropped about $7.8 million worth. These bearish behaviors are important to note, as aggregate hedge fund interest fell by 7 funds by the end of the third quarter.

Let's go over hedge fund activity in other stocks similar to Amcor plc (NYSE:AMCR). We will take a look at Nasdaq, Inc. (NASDAQ:NDAQ), Shinhan Financial Group Co., Ltd. (NYSE:SHG), AmerisourceBergen Corporation (NYSE:ABC), and Martin Marietta Materials, Inc. (NYSE:MLM). All of these stocks' market caps match AMCR's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position NDAQ,25,181346,0 SHG,3,8979,-2 ABC,40,580579,2 MLM,52,2345404,9 Average,30,779077,2.25 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 30 hedge funds with bullish positions and the average amount invested in these stocks was $779 million. That figure was $48 million in AMCR's case. Martin Marietta Materials, Inc. (NYSE:MLM) is the most popular stock in this table. On the other hand Shinhan Financial Group Co., Ltd. (NYSE:SHG) is the least popular one with only 3 bullish hedge fund positions. Amcor plc (NYSE:AMCR) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and 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 1.0% in 2020 through May 1st but beat the market by 12.9 percentage points. Unfortunately AMCR wasn't nearly as popular as these 10 stocks (hedge fund sentiment was quite bearish); AMCR investors were disappointed as the stock returned -19% 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 most of these stocks already outperformed the market in 2020. Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

5 Most Popular Stocks Among Hedge Funds
5 Most Popular Stocks Among Hedge Funds

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

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