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Did Hedge Funds Make The Right Call On Amcor plc (AMCR) ?

We know that hedge funds generate strong, risk-adjusted returns over the long run, which is why imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, professional investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn’t mean that they don’t have occasional colossal losses; they do. However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, let’s examine the smart money sentiment towards Amcor plc (NYSE:AMCR) and determine whether hedge funds skillfully traded this stock.

Is Amcor plc (NYSE:AMCR) a superb investment now? Hedge funds were getting more optimistic. The number of long hedge fund bets increased by 9 recently. Our calculations also showed that AMCR 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). AMCR was in 19 hedge funds’ portfolios at the end of the first quarter of 2020. There were 10 hedge funds in our database with AMCR holdings at the end of the previous quarter.

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

So, why do we pay attention to hedge fund sentiment before making any investment decisions? Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 58 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.

Ken Griffin

Ken Griffin of Citadel Investment Group

At Insider Monkey we scour multiple sources to uncover the next great investment idea. Cannabis stocks are roaring back in 2020, so we are checking out this under-the-radar 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. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. With all of this in mind let’s take a gander at the recent hedge fund action encompassing Amcor plc (NYSE:AMCR).

Hedge fund activity in Amcor plc (NYSE:AMCR)

At the end of the first quarter, a total of 19 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 90% from the previous quarter. On the other hand, there were a total of 0 hedge funds with a bullish position in AMCR a year ago. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Is AMCR A Good Stock To Buy?

The largest stake in Amcor plc (NYSE:AMCR) was held by Polaris Capital Management, which reported holding $76.2 million worth of stock at the end of September. It was followed by Citadel Investment Group with a $64.7 million position. Other investors bullish on the company included Millennium Management, Adage Capital Management, and D E Shaw. In terms of the portfolio weights assigned to each position Polaris Capital Management allocated the biggest weight to Amcor plc (NYSE:AMCR), around 4.6% of its 13F portfolio. Gotham Asset Management is also relatively very bullish on the stock, designating 0.17 percent of its 13F equity portfolio to AMCR.

As industrywide interest jumped, some big names were leading the bulls’ herd. Polaris Capital Management, managed by Bernard Horn, established the most outsized position in Amcor plc (NYSE:AMCR). Polaris Capital Management had $76.2 million invested in the company at the end of the quarter. Israel Englander’s Millennium Management also made a $21.4 million investment in the stock during the quarter. The following funds were also among the new AMCR investors: Noam Gottesman’s GLG Partners, Peter Muller’s PDT Partners, and Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital.

Let’s go over hedge fund activity in other stocks similar to Amcor plc (NYSE:AMCR). These stocks are Leidos Holdings Inc (NYSE:LDOS), Nomura Holdings, Inc. (NYSE:NMR), Markel Corporation (NYSE:MKL), and Seagate Technology plc (NASDAQ:STX). This group of stocks’ market values resemble AMCR’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
LDOS 30 571063 3
NMR 5 18048 0
MKL 32 982316 -5
STX 32 2205943 -3
Average 24.75 944343 -1.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 24.75 hedge funds with bullish positions and the average amount invested in these stocks was $944 million. That figure was $208 million in AMCR’s case. Markel Corporation (NYSE:MKL) is the most popular stock in this table. On the other hand Nomura Holdings, Inc. (NYSE:NMR) is the least popular one with only 5 bullish hedge fund positions. Amcor plc (NYSE:AMCR) 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 18.6% in 2020 through July 27th and still beat the market by 17.1 percentage points. A small number of hedge funds were also right about betting on AMCR as the stock returned 34.8% since the end of March and outperformed the market by an even larger margin.

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