Although the masses and most of the financial media blame hedge funds for their exorbitant fee structure and disappointing performance, these investors have proved to have great stock picking abilities over the years (that’s why their assets under management continue to swell). We believe hedge fund sentiment should serve as a crucial tool of an individual investor’s stock selection process, as it may offer great insights of how the brightest minds of the finance industry feel about specific stocks. After all, these people have access to smartest analysts and expensive data/information sources that individual investors can’t match. So should one consider investing in AECOM (NYSE:ACM)? The smart money sentiment can provide an answer to this question.
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s flagship best performing hedge funds strategy returned 6.3% year to date (through December 3rd) and outperformed the market even though it draws its stock picks among small-cap stocks. This strategy also outperformed the market by 18 percentage points since its inception (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
Let’s take a peek at the new hedge fund action regarding AECOM (NYSE:ACM).
How have hedgies been trading AECOM (NYSE:ACM)?
At Q3’s end, a total of 18 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -5% from the second quarter of 2018. Below, you can check out the change in hedge fund sentiment towards ACM over the last 13 quarters. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
According to Insider Monkey’s hedge fund database, Luminus Management, managed by Jonathan Barrett and Paul Segal, holds the number one position in AECOM (NYSE:ACM). Luminus Management has a $97 million position in the stock, comprising 2% of its 13F portfolio. The second largest stake is held by Richard S. Pzena of Pzena Investment Management, with a $79.2 million position; 0.4% of its 13F portfolio is allocated to the stock. Some other professional money managers that are bullish comprise Edgar Wachenheim’s Greenhaven Associates, Martin D. Sass’s MD Sass and Israel Englander’s Millennium Management.
Because AECOM (NYSE:ACM) has faced a decline in interest from the entirety of the hedge funds we track, it’s safe to say that there lies a certain “tier” of hedge funds that slashed their positions entirely heading into Q3. It’s worth mentioning that Matthew Tewksbury’s Stevens Capital Management dumped the largest stake of the “upper crust” of funds followed by Insider Monkey, valued at about $1.7 million in stock. Mark Coe’s fund, Coe Capital Management, also dumped its stock, about $1.6 million worth. These transactions are interesting, as total hedge fund interest dropped by 1 funds heading into Q3.
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as AECOM (NYSE:ACM) but similarly valued. We will take a look at The Hanover Insurance Group, Inc. (NYSE:THG), Ashland Global Holdings Inc.. (NYSE:ASH), Cypress Semiconductor Corporation (NASDAQ:CY), and Popular Inc (NASDAQ:BPOP). This group of stocks’ market valuations are similar to ACM’s market valuation.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
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As you can see these stocks had an average of 25.5 hedge funds with bullish positions and the average amount invested in these stocks was $632 million. That figure was $294 million in ACM’s case. Ashland Global Holdings Inc.. (NYSE:ASH) is the most popular stock in this table. On the other hand The Hanover Insurance Group, Inc. (NYSE:THG) is the least popular one with only 18 bullish hedge fund positions. Compared to these stocks AECOM (NYSE:ACM) is even less popular than THG. 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. This article was originally published at Insider Monkey.