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Were Hedge Funds Right About Dumping Air Products & Chemicals, Inc. (ADP)?

Reymerlyn Martin

We at Insider Monkey have gone over 700 13F filings that hedge funds and prominent investors are required to file by the SEC. The 13F filings show the funds' and investors' portfolio positions as of December 31st. In this article we look at what those investors think of Air Products & Chemicals, Inc. (NYSE:APD).

Is Air Products & Chemicals, Inc. (NYSE:APD) a buy right now? Hedge funds are in a bearish mood. The number of bullish hedge fund bets were trimmed by 6 lately. Our calculations also showed that APD isn't among the 30 most popular stocks among hedge funds.

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 flagship best performing hedge funds strategy returned 20.7% year to date (through March 12th) and outperformed the market even though it draws its stock picks among small-cap stocks. This strategy also outperformed the market by 32 percentage points since its inception (see the details here). That's why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

Jonathan Barrett Luminus Management

We're going to check out the recent hedge fund action surrounding Air Products & Chemicals, Inc. (NYSE:APD).

How have hedgies been trading Air Products & Chemicals, Inc. (NYSE:APD)?

At the end of the fourth quarter, a total of 36 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -14% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards APD over the last 14 quarters. So, let's examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

APD_mar2019

Among these funds, Luminus Management held the most valuable stake in Air Products & Chemicals, Inc. (NYSE:APD), which was worth $215.8 million at the end of the third quarter. On the second spot was Two Sigma Advisors which amassed $102.6 million worth of shares. Moreover, Holocene Advisors, D E Shaw, and Citadel Investment Group were also bullish on Air Products & Chemicals, Inc. (NYSE:APD), allocating a large percentage of their portfolios to this stock.

Since Air Products & Chemicals, Inc. (NYSE:APD) has experienced a decline in interest from the aggregate hedge fund industry, it's easy to see that there were a few fund managers that slashed their positions entirely heading into Q3. Interestingly, Robert Pohly's Samlyn Capital cut the biggest position of the 700 funds followed by Insider Monkey, worth close to $107.5 million in stock. Steve Cohen's fund, Point72 Asset Management, also cut its stock, about $60.2 million worth. These bearish behaviors are intriguing to say the least, as total hedge fund interest dropped by 6 funds heading into Q3.

Let's go over hedge fund activity in other stocks - not necessarily in the same industry as Air Products & Chemicals, Inc. (NYSE:APD) but similarly valued. We will take a look at Workday Inc (NASDAQ:WDAY), Carnival plc (NYSE:CUK), Baxter International Inc. (NYSE:BAX), and Aon plc (NYSE:AON). All of these stocks' market caps match APD's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position WDAY,31,1073344,1 CUK,8,84703,0 BAX,36,3121102,-7 AON,40,2187808,10 Average,28.75,1616739,1 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 28.75 hedge funds with bullish positions and the average amount invested in these stocks was $1617 million. That figure was $927 million in APD's case. Aon plc (NYSE:AON) is the most popular stock in this table. On the other hand Carnival plc (NYSE:CUK) is the least popular one with only 8 bullish hedge fund positions. Air Products & Chemicals, Inc. (NYSE:APD) is not the most popular stock in this group but hedge fund interest is still above average. 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 15 most popular stocks among hedge funds returned 19.7% through March 15th and outperformed the S&P 500 ETF (SPY) by 6.6 percentage points. Hedge funds were also right about betting on ADP, though not to the same extent, as the stock returned 19.1% and outperformed the market as well.

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

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