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Were Hedge Funds Right About Buying American Tower Corporation (AMT)?

Nina Todic

The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We have processed the filings of the more than 700 world-class investment firms that we track and now have access to the collective wisdom contained in these filings, which are based on their June 28 holdings, data that is available nowhere else. Should you consider American Tower Corporation (NYSE:AMT) for your portfolio? We'll look to this invaluable collective wisdom for the answer.

Is American Tower Corporation (REIT) (NYSE:AMT) a worthy stock to buy now? Hedge funds are in a bullish mood. The number of long hedge fund bets advanced by 3 recently. Our calculations also showed that AMT isn't among the 30 most popular stocks among hedge funds (see the video at the end of this article). AMT was in 42 hedge funds' portfolios at the end of the second quarter of 2019. There were 39 hedge funds in our database with AMT positions at the end of the previous quarter.

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 market by 40 percentage points since May 2014 through May 30, 2019 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter. Even if you aren't comfortable with shorting stocks, you should at least avoid initiating long positions in our short portfolio.

William Von Mueffling - Cantillon Capital Management

Unlike some fund managers who are betting on Dow reaching 40000 in a year, our long-short investment strategy doesn't rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. We're going to review the fresh hedge fund action encompassing American Tower Corporation (REIT) (NYSE:AMT).

Hedge fund activity in American Tower Corporation (REIT) (NYSE:AMT)

At Q2's end, a total of 42 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 8% from one quarter earlier. On the other hand, there were a total of 39 hedge funds with a bullish position in AMT a year ago. With hedge funds' capital changing hands, there exists an "upper tier" of noteworthy hedge fund managers who were adding to their holdings significantly (or already accumulated large positions).

No of Hedge Funds with AMT Positions

More specifically, Akre Capital Management was the largest shareholder of American Tower Corporation (REIT) (NYSE:AMT), with a stake worth $1469.3 million reported as of the end of March. Trailing Akre Capital Management was Cantillon Capital Management, which amassed a stake valued at $437.1 million. Renaissance Technologies, Alkeon Capital Management, and AQR Capital Management were also very fond of the stock, giving the stock large weights in their portfolios.

Now, key money managers have been driving this bullishness. Stevens Capital Management, managed by Matthew Tewksbury, established the most outsized position in American Tower Corporation (REIT) (NYSE:AMT). Stevens Capital Management had $8.6 million invested in the company at the end of the quarter. Paul Marshall and Ian Wace's Marshall Wace LLP also initiated a $6 million position during the quarter. The other funds with brand new AMT positions are Benjamin A. Smith's Laurion Capital Management, Matthew Hulsizer's PEAK6 Capital Management, and Joel Greenblatt's Gotham Asset Management.

Let's also examine hedge fund activity in other stocks - not necessarily in the same industry as American Tower Corporation (REIT) (NYSE:AMT) but similarly valued. These stocks are ASML Holding N.V. (NASDAQ:ASML), Charter Communications, Inc. (NASDAQ:CHTR), Banco Santander (Brasil) SA (NYSE:BSBR), and United Parcel Service, Inc. (NYSE:UPS). This group of stocks' market values are closest to AMT's market value.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position ASML,12,698865,-3 CHTR,66,7511059,-1 BSBR,11,179610,1 UPS,36,1051684,-1 Average,31.25,2360305,-1 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 31.25 hedge funds with bullish positions and the average amount invested in these stocks was $2360 million. That figure was $3149 million in AMT's case. Charter Communications, Inc. (NASDAQ:CHTR) is the most popular stock in this table. On the other hand Banco Santander (Brasil) SA (NYSE:BSBR) is the least popular one with only 11 bullish hedge fund positions. American Tower Corporation (REIT) (NYSE:AMT) is not the most popular stock in this group but hedge fund interest is still above average. Our calculations showed that top 20 most popular stocks among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Hedge funds were also right about betting on AMT as the stock returned 8.6% during the third quarter and outperformed the market. Hedge funds were rewarded for their relative bullishness. Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

5 Most Popular Stocks Among Hedge Funds

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

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