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Amphenol Corporation (APH): Are Hedge Funds Right About This Stock?

Before we spend days researching a stock idea we’d like to take a look at how hedge funds and billionaire investors recently traded that stock. S&P 500 Index returned about 7.6% during the last 12 months ending November 21, 2016. Most investors don’t notice that less than 49% of the stocks in the index outperformed the index. This means you (or a monkey throwing a dart) have less than an even chance of beating the market by randomly picking a stock. On the other hand, the top 30 mid-cap stocks among the best performing hedge funds had an average return of 18% during the same period. Hedge funds had bad stock picks like everyone else. We are sure you have read about their worst picks, like Valeant, in the media over the past year. So, taking cues from hedge funds isn’t a foolproof strategy, but it seems to work on average. In this article, we will take a look at what hedge funds think about Amphenol Corporation (NYSE:APH).

Amphenol Corporation (NYSE:APH) has seen an increase in hedge fund sentiment in recent months. APH was in 21 hedge funds’ portfolios at the end of the third quarter of 2016. There were 19 hedge funds in our database with APH positions at the end of the previous quarter. At the end of this article we will also compare APH to other stocks including Republic Services, Inc. (NYSE:RSG), Under Armour Inc (NYSE:UA), and Hartford Financial Services Group Inc (NYSE:HIG) to get a better sense of its popularity.

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At Insider Monkey, we’ve developed an investment strategy that has delivered market-beating returns over the past 12 months. Our strategy identifies the 100 best-performing funds of the previous quarter from among the collection of 700+ successful funds that we track in our database, which we accomplish using our returns methodology. We then study the portfolios of those 100 funds using the latest 13F data to uncover the 30 most popular mid-cap stocks (market caps of between $1 billion and $10 billion) among them to hold until the next filing period. This strategy delivered 18% gains over the past 12 months, more than doubling the 8% returns enjoyed by the S&P 500 ETFs.

kirill_makarov/Shutterstock.com

kirill_makarov/Shutterstock.com

With all of this in mind, we’re going to take a gander at the latest action regarding Amphenol Corporation (NYSE:APH).

How have hedgies been trading Amphenol Corporation (NYSE:APH)?

At Q3’s end, a total of 21 of the hedge funds tracked by Insider Monkey were bullish on this stock, a gain of 11% from one quarter earlier. With hedge funds’ capital changing hands, there exists a few key hedge fund managers who were boosting their stakes significantly (or already accumulated large positions).

HedgeFundSentimentChart

Of the funds tracked by Insider Monkey, Robert Joseph Caruso’s Select Equity Group has the largest position in Amphenol Corporation (NYSE:APH), worth close to $190.6 million, comprising 1.6% of its total 13F portfolio. Sitting at the No. 2 spot is Anand Parekh of Alyeska Investment Group, with a $35.3 million position; 0.4% of its 13F portfolio is allocated to the company. Some other professional money managers with similar optimism include Phill Gross and Robert Atchinson’s Adage Capital Management, Ken Griffin’s Citadel Investment Group and Benjamin A. Smith’s Laurion Capital Management.

As aggregate interest increased, key money managers have been driving this bullishness. Laurion Capital Management, run by Benjamin A. Smith, assembled the biggest call position in Amphenol Corporation (NYSE:APH). According to regulatory filings, the fund had $16.6 million invested in the company at the end of the quarter. David Harding’s Winton Capital Management also initiated a $4.2 million position during the quarter. The following funds were also among the new APH investors: Glenn Russell Dubin’s Highbridge Capital Management, Ken Griffin’s Citadel Investment Group, and D. E. Shaw’s D E Shaw.

Let’s also examine hedge fund activity in other stocks similar to Amphenol Corporation (NYSE:APH). These stocks are Republic Services, Inc. (NYSE:RSG), Under Armour Inc (NYSE:UA), Hartford Financial Services Group Inc (NYSE:HIG), and International Paper Company (NYSE:IP). This group of stocks’ market valuations are similar to APH’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
RSG 21 485314 -4
UA 28 528456 -3
HIG 37 1041662 3
IP 33 457001 13

As you can see these stocks had an average of 30 hedge funds with bullish positions and the average amount invested in these stocks was $628 million. That figure was $323 million in APH’s case. Hartford Financial Services Group Inc (NYSE:HIG) is the most popular stock in this table. On the other hand Republic Services, Inc. (NYSE:RSG) is the least popular one with only 21 bullish hedge fund positions. Compared to these stocks Amphenol Corporation (NYSE:APH) is even less popular than RSG. Considering that hedge funds aren’t fond of this stock in relation to other companies analyzed in this article, it may be a good idea to analyze it in detail and understand why the smart money isn’t behind this stock. This isn’t necessarily bad news. Although it is possible that hedge funds may think the stock is overpriced and view the stock as a short candidate, they may not be very familiar with the bullish thesis. In either case more research is warranted.

Disclosure: none.

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