Hedge Funds Are Crazy About Affiliated Managers Group, Inc. (AMG)

Investing in small cap stocks has historically been a way to outperform the market, as small cap companies typically grow faster on average than the blue chips. That outperformance comes with a price, however, as there are occasional periods of higher volatility. The time period between June 25 and the end of October was one of those periods, as the Russell 2000 ETF (IWM) has underperformed the larger S&P 500 ETF (SPY) by more than 14 percentage points. Given that the funds we track tend to have a disproportionate amount of their portfolios in smaller cap stocks, they have seen some volatility in their portfolios too. Actually their moves are potentially one of the factors that contributed to this volatility. In this article, we use our extensive database of hedge fund holdings to find out what the smart money thinks of Affiliated Managers Group, Inc. (NYSE:AMG).

Affiliated Managers Group, Inc. (NYSE:AMG) was in 34 hedge funds’ portfolios at the end of the third quarter of 2015. AMG has experienced an increase in activity from the world’s largest hedge funds recently. There were 27 hedge funds in our database with AMG holdings at the end of the previous quarter. At the end of this article we will also compare AMG to other stocks including HollyFrontier Corp (NYSE:HFC), Pentair plc. Ordinary Share (NYSE:PNR), and Ultrapar Participacoes SA (ADR) (NYSE:UGP) to get a better sense of its popularity.

To most shareholders, hedge funds are viewed as slow, outdated investment tools of years past. While there are more than an 8000 funds with their doors open today, Our experts look at the elite of this club, approximately 700 funds. These investment experts handle bulk of the smart money’s total asset base, and by tracking their finest equity investments, Insider Monkey has unearthed various investment strategies that have historically outstripped Mr. Market. Insider Monkey’s small-cap hedge fund strategy beat the S&P 500 index by 12 percentage points per annum for a decade in their back tests.

Keeping this in mind, let’s view the new action regarding Affiliated Managers Group, Inc. (NYSE:AMG).

What have hedge funds been doing with Affiliated Managers Group, Inc. (NYSE:AMG)?

At Q3’s end, a total of 34 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 26% from one quarter earlier. With hedgies’ sentiment swirling, there exists an “upper tier” of noteworthy hedge fund managers who were increasing their stakes significantly (or already accumulated large positions).

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Ken Griffin’s Citadel Investment Group has the number one position in Affiliated Managers Group, Inc. (NYSE:AMG), worth close to $141.3 million, accounting for 0.1% of its total 13F portfolio. Sitting at the No. 2 spot is Farallon Capital, managed by Thomas Steyer, which holds a $91.1 million position; 1.2% of its 13F portfolio is allocated to the stock. Remaining hedge funds and institutional investors with similar optimism comprise Panayotis Takis Sparaggis’s Alkeon Capital Management, Israel Englander’s Millennium Management and Jim Simons’s Renaissance Technologies.

With a general bullishness amongst the heavyweights, key money managers were leading the bulls’ herd. Highbridge Capital Management, managed by Glenn Russell Dubin, initiated the most valuable position in Affiliated Managers Group, Inc. (NYSE:AMG). Highbridge Capital Management had $16.5 million invested in the company at the end of the quarter. David Harding’s Winton Capital Management also made a $11.1 million investment in the stock during the quarter. The other funds with new positions in the stock are John Overdeck and David Siegel’s Two Sigma Advisors, Millennium Management Subsidiary’s Blue Arrow Capital Management, and Anand Parekh’s Alyeska Investment Group.

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Affiliated Managers Group, Inc. (NYSE:AMG) but similarly valued. We will take a look at HollyFrontier Corp (NYSE:HFC), Pentair plc. Ordinary Share (NYSE:PNR), Ultrapar Participacoes SA (ADR) (NYSE:UGP), and Microchip Technology Inc. (NASDAQ:MCHP). All of these stocks’ market caps resemble AMG’s market cap.

As you can see these stocks had an average of 23 hedge funds with bullish positions and the average amount invested in these stocks was $585 million. That figure was $548 million in AMG’s case. HollyFrontier Corp (NYSE:HFC) is the most popular stock in this table. On the other hand Ultrapar Participacoes SA (ADR) (NYSE:UGP) is the least popular one with only 6 bullish hedge fund positions. Affiliated Managers Group, Inc. (NYSE:AMG) 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. In this regard, HFC might be a better candidate to consider a long position.