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

Reymerlyn Martin
·7 min read

Many prominent investors, including Warren Buffett, David Tepper and Stan Druckenmiller, have been cautious regarding the current bull market and missed out as the stock market reached another high in recent weeks. On the other hand, technology hedge funds weren't timid and registered double digit market beating gains. Financials, energy and industrial stocks aren't doing great but many of the stocks that delivered strong returns since March are still going very strong and hedge funds actually increased their positions in these stocks. In this article we will find out how hedge fund sentiment to American Tower Corporation (NYSE:AMT) changed recently.

Is American Tower Corporation (NYSE:AMT) a buy here? Prominent investors were becoming hopeful. The number of long hedge fund positions advanced by 4 in recent months. American Tower Corporation (NYSE:AMT) was in 61 hedge funds' portfolios at the end of June. The all time high for this statistics is 61. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that AMT isn't among the 30 most popular stocks among hedge funds (click for Q2 rankings and see the video for a quick look at the top 5 stocks). There were 57 hedge funds in our database with AMT positions at the end of the first quarter. Video: Watch our video about the top 5 most popular hedge fund stocks.

According to most investors, hedge funds are perceived as unimportant, outdated financial tools of years past. While there are more than 8000 funds with their doors open today, We choose to focus on the aristocrats of this group, approximately 850 funds. These money managers watch over the lion's share of the hedge fund industry's total capital, and by watching their first-class investments, Insider Monkey has deciphered many investment strategies that have historically surpassed the market. Insider Monkey's flagship short hedge fund strategy defeated the S&P 500 short ETFs by around 20 percentage points annually since its inception in March 2017. Our portfolio of short stocks lost 34% since February 2017 (through August 17th) even though the market was up 53% during the same period. We just shared a list of 8 short targets in our latest quarterly update .

GOTHAM ASSET MANAGEMENT
GOTHAM ASSET MANAGEMENT

Joel Greenblatt of Gotham Asset Management

At Insider Monkey we scour multiple sources to uncover the next great investment idea. Hedge fund sentiment towards Tesla reached its all time high at the end of 2019 and Tesla shares more than quadrupled this year. We are trying to identify other EV revolution winners, so we are checking out this under-the-radar lithium stock. We go through lists like the 10 most profitable companies in the world 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 to get excerpts of these letters in your inbox. Keeping this in mind we're going to analyze the key hedge fund action surrounding American Tower Corporation (NYSE:AMT).

How have hedgies been trading American Tower Corporation (NYSE:AMT)?

Heading into the third quarter of 2020, a total of 61 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 7% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in AMT over the last 20 quarters. With hedge funds' positions undergoing their usual ebb and flow, there exists a select group of notable hedge fund managers who were upping their stakes meaningfully (or already accumulated large positions).

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Akre Capital Management, managed by Charles Akre, holds the most valuable position in American Tower Corporation (NYSE:AMT). Akre Capital Management has a $1.8196 billion position in the stock, comprising 13.7% of its 13F portfolio. The second most bullish fund manager is William von Mueffling of Cantillon Capital Management, with a $542.6 million position; 4.7% of its 13F portfolio is allocated to the stock. Remaining members of the smart money that are bullish comprise Ken Fisher's Fisher Asset Management, Panayotis Takis Sparaggis's Alkeon Capital Management and Cliff Asness's AQR Capital Management. In terms of the portfolio weights assigned to each position Akre Capital Management allocated the biggest weight to American Tower Corporation (NYSE:AMT), around 13.71% of its 13F portfolio. Heard Capital is also relatively very bullish on the stock, setting aside 9.71 percent of its 13F equity portfolio to AMT.

With a general bullishness amongst the heavyweights, key hedge funds were breaking ground themselves. Fisher Asset Management, managed by Ken Fisher, assembled the largest position in American Tower Corporation (NYSE:AMT). Fisher Asset Management had $455.5 million invested in the company at the end of the quarter. Jaime Sterne's Skye Global Management also made a $24 million investment in the stock during the quarter. The other funds with new positions in the stock are Ben Levine, Andrew Manuel and Stefan Renold's LMR Partners, Joel Greenblatt's Gotham Asset Management, and Minhua Zhang's Weld Capital Management.

Let's now take a look at hedge fund activity in other stocks - not necessarily in the same industry as American Tower Corporation (NYSE:AMT) but similarly valued. These stocks are Shopify Inc (NYSE:SHOP), Linde plc (NYSE:LIN), Philip Morris International Inc. (NYSE:PM), International Business Machines Corp. (NYSE:IBM), Citigroup Inc. (NYSE:C), Charter Communications, Inc. (NASDAQ:CHTR), and Wells Fargo & Company (NYSE:WFC). This group of stocks' market values are similar to AMT's market value.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position SHOP,57,5916379,14 LIN,52,3643095,-1 PM,53,2574980,5 IBM,46,918051,5 C,96,6229205,10 CHTR,96,11227561,-8 WFC,86,10344809,10 Average,69.4,5836297,5 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 69.4 hedge funds with bullish positions and the average amount invested in these stocks was $5836 million. That figure was $4407 million in AMT's case. Citigroup Inc. (NYSE:C) is the most popular stock in this table. On the other hand International Business Machines Corp. (NYSE:IBM) is the least popular one with only 46 bullish hedge fund positions. American Tower Corporation (NYSE:AMT) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for AMT is 54. 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 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 29.2% in 2020 through October 16th and surpassed the market by 19.7 percentage points. Unfortunately AMT wasn't nearly as popular as these 10 stocks (hedge fund sentiment was quite bearish); AMT investors were disappointed as the stock returned -5.7% since the end of June (through 10/16) 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.

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

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