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Antero Midstream Corp (AM): Hedge Funds In Wait-and-See Mode

In this article you are going to find out whether hedge funds think Antero Midstream Corp (NYSE:AM) 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.

Antero Midstream Corp (NYSE:AM) shares haven’t seen a lot of action during the first quarter. Overall, hedge fund sentiment was unchanged. The stock was in 14 hedge funds’ portfolios at the end of March. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Plains GP Holdings LP (NYSE:PAGP), Magnolia Oil & Gas Corporation (NYSE:MGY), and Independent Bank Group Inc (NASDAQ:IBTX) to gather more data points. Our calculations also showed that AM 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).

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

According to most investors, hedge funds are assumed to be underperforming, old financial vehicles of years past. While there are over 8000 funds trading at the moment, We hone in on the masters of this club, around 850 funds. Most estimates calculate that this group of people have their hands on most of all hedge funds’ total capital, and by paying attention to their highest performing equity investments, Insider Monkey has found a few investment strategies that have historically outstripped Mr. Market. Insider Monkey’s flagship short hedge fund strategy defeated the S&P 500 short ETFs by around 20 percentage points a 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 .

Stuart Zimmer Zimmer Partners

Stuart Zimmer of Zimmer Partners

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, blockchain technology’s influence will go beyond online payments. So, we are checking out this futurist’s moonshot opportunities in tech stocks. We interview hedge fund managers and ask them about their best ideas. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. For example we are checking out stocks recommended/scorned by legendary Bill Miller. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 in February after realizing the coronavirus pandemic’s significance before most investors. Now we’re going to take a look at the fresh hedge fund action regarding Antero Midstream Corp (NYSE:AM).

How have hedgies been trading Antero Midstream Corp (NYSE:AM)?

At the end of the first quarter, a total of 14 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 0% from the fourth quarter of 2019. The graph below displays the number of hedge funds with bullish position in AM over the last 18 quarters. With hedgies’ capital changing hands, there exists an “upper tier” of key hedge fund managers who were increasing their holdings substantially (or already accumulated large positions).

Among these funds, Zimmer Partners held the most valuable stake in Antero Midstream Corp (NYSE:AM), which was worth $9.4 million at the end of the third quarter. On the second spot was Brave Warrior Capital which amassed $6.2 million worth of shares. Millennium Management, Shah Capital Management, and Prescott Group Capital Management were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Shah Capital Management allocated the biggest weight to Antero Midstream Corp (NYSE:AM), around 3.5% of its 13F portfolio. Mountain Lake Investment Management is also relatively very bullish on the stock, dishing out 2.8 percent of its 13F equity portfolio to AM.

Seeing as Antero Midstream Corp (NYSE:AM) has experienced falling interest from hedge fund managers, it’s easy to see that there was a specific group of hedge funds that decided to sell off their full holdings last quarter. At the top of the heap, Bob Peck and Andy Raab’s FPR Partners dropped the biggest stake of the “upper crust” of funds watched by Insider Monkey, comprising close to $82.1 million in stock, and David Harding’s Winton Capital Management was right behind this move, as the fund sold off about $3.3 million worth. These moves are important to note, as total hedge fund interest stayed the same (this is a bearish signal in our experience).

Let’s also examine hedge fund activity in other stocks similar to Antero Midstream Corp (NYSE:AM). We will take a look at Plains GP Holdings LP (NYSE:PAGP), Magnolia Oil & Gas Corporation (NYSE:MGY), Independent Bank Group Inc (NASDAQ:IBTX), and DiamondRock Hospitality Company (NYSE:DRH). All of these stocks’ market caps match AM’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
PAGP 22 88065 -4
MGY 20 47544 2
IBTX 20 74143 -3
DRH 16 38994 -1
Average 19.5 62187 -1.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 19.5 hedge funds with bullish positions and the average amount invested in these stocks was $62 million. That figure was $45 million in AM’s case. Plains GP Holdings LP (NYSE:PAGP) is the most popular stock in this table. On the other hand DiamondRock Hospitality Company (NYSE:DRH) is the least popular one with only 16 bullish hedge fund positions. Compared to these stocks Antero Midstream Corp (NYSE:AM) is even less popular than DRH. Hedge funds clearly dropped the ball on AM as the stock delivered strong returns, though hedge funds’ consensus picks still generated respectable returns. 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 13.3% in 2020 through June 25th and still beat the market by 16.8 percentage points. A small number of hedge funds were also right about betting on AM as the stock returned 175.5% so far in 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.