Air Products & Chemicals, Inc. (APD): Are Hedge Funds Right About This Stock?

In this article you are going to find out whether hedge funds think Air Products & Chemicals, Inc. (NYSE:APD) is a good investment right now. We like to check what the smart money thinks first before doing extensive research on a given stock. Although there have been several high profile failed hedge fund picks, the consensus picks among hedge fund investors have historically outperformed the market after adjusting for known risk attributes. It’s not surprising given that hedge funds have access to better information and more resources to predict the winners in the stock market.

Is Air Products & Chemicals, Inc. (NYSE:APD) ready to rally soon? Money managers are becoming less confident. The number of bullish hedge fund bets went down by 13 recently. Our calculations also showed that APD isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks). APD was in 41 hedge funds’ portfolios at the end of March. There were 54 hedge funds in our database with APD holdings at the end of the previous quarter.

Video: Watch our video about the top 5 most popular hedge fund stocks.

In the eyes of most stock holders, hedge funds are seen as worthless, old financial tools of the past. While there are over 8000 funds trading at present, Our experts hone in on the upper echelon of this group, approximately 850 funds. These investment experts watch over the lion’s share of the smart money’s total capital, and by tailing their best investments, Insider Monkey has unsheathed various investment strategies that have historically outpaced Mr. Market. Insider Monkey’s flagship short hedge fund strategy beat the S&P 500 short ETFs by around 20 percentage points per year since its inception in March 2017. Our portfolio of short stocks lost 36% since February 2017 (through May 18th) even though the market was up 30% during the same period. We just shared a list of 8 short targets in our latest quarterly update .

Anna Nikolayevsky Axel Capital

Anna Nikolayevsky of Axel Capital

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, we are still not out of the woods in terms of the coronavirus pandemic. So, we checked out this successful trader’s “corona catalyst plays“. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. 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 the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Now let’s take a look at the fresh hedge fund action surrounding Air Products & Chemicals, Inc. (NYSE:APD).

Hedge fund activity in Air Products & Chemicals, Inc. (NYSE:APD)

Heading into the second quarter of 2020, a total of 41 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -24% from the fourth quarter of 2019. By comparison, 34 hedge funds held shares or bullish call options in APD a year ago. With the smart money’s positions undergoing their usual ebb and flow, there exists an “upper tier” of key hedge fund managers who were adding to their holdings significantly (or already accumulated large positions).

When looking at the institutional investors followed by Insider Monkey, John Overdeck and David Siegel’s Two Sigma Advisors has the biggest position in Air Products & Chemicals, Inc. (NYSE:APD), worth close to $74.6 million, comprising 0.3% of its total 13F portfolio. Sitting at the No. 2 spot is AQR Capital Management, managed by Cliff Asness, which holds a $44.7 million position; the fund has 0.1% of its 13F portfolio invested in the stock. Some other professional money managers with similar optimism encompass Phill Gross and Robert Atchinson’s Adage Capital Management, David Gallo’s Valinor Management LLC and Steve Cohen’s Point72 Asset Management. In terms of the portfolio weights assigned to each position SAYA Management allocated the biggest weight to Air Products & Chemicals, Inc. (NYSE:APD), around 8.27% of its 13F portfolio. Axel Capital Management is also relatively very bullish on the stock, earmarking 7.81 percent of its 13F equity portfolio to APD.

Seeing as Air Products & Chemicals, Inc. (NYSE:APD) has witnessed declining sentiment from the aggregate hedge fund industry, it’s easy to see that there lies a certain “tier” of hedgies that decided to sell off their full holdings by the end of the third quarter. At the top of the heap, Michael Doheny’s Freshford Capital Management cut the biggest investment of the “upper crust” of funds watched by Insider Monkey, valued at about $51.9 million in stock. Gary Claar’s fund, Claar Advisors, also cut its stock, about $21.1 million worth. These moves are intriguing to say the least, as aggregate hedge fund interest fell by 13 funds by the end of the third quarter.

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. These stocks are Shopify Inc (NYSE:SHOP), Kimberly Clark Corporation (NYSE:KMB), Marsh & McLennan Companies, Inc. (NYSE:MMC), and Deere & Company (NYSE:DE). All of these stocks’ market caps are closest to APD’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
SHOP 43 2892013 13
KMB 46 1173309 9
MMC 37 668435 6
DE 44 875005 -6
Average 42.5 1402191 5.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 42.5 hedge funds with bullish positions and the average amount invested in these stocks was $1402 million. That figure was $352 million in APD’s case. Kimberly Clark Corporation (NYSE:KMB) is the most popular stock in this table. On the other hand Marsh & McLennan Companies, Inc. (NYSE:MMC) is the least popular one with only 37 bullish hedge fund positions. Air Products & Chemicals, Inc. (NYSE:APD) is not the least popular stock in this group but hedge fund interest is still below average. 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 8.3% in 2020 through the end of May and still beat the market by 13.2 percentage points. A small number of hedge funds were also right about betting on APD as the stock returned 21.1% during the second quarter and outperformed the market by an even larger margin.

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