Hedge Funds Are Buying Air Products & Chemicals, Inc. (APD)

At Insider Monkey, we pore over the filings of nearly 873 top investment firms every quarter, a process we have now completed for the latest reporting period. The data we’ve gathered as a result gives us access to a wealth of collective knowledge based on these firms’ portfolio holdings as of June 30th. In this article, we will use that wealth of knowledge to determine whether or not Air Products & Chemicals, Inc. (NYSE:APD) makes for a good investment right now.

Is Air Products & Chemicals, Inc. (NYSE:APD) ready to rally soon? Hedge funds were betting on the stock. The number of bullish hedge fund positions rose by 8 recently. Air Products & Chemicals, Inc. (NYSE:APD) was in 40 hedge funds’ portfolios at the end of the second quarter of 2021. The all time high for this statistic is 77. Our calculations also showed that APD isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings).

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 79 percentage points since March 2017 (see the details here). We have been able to outperform the passive index funds by tracking the moves of corporate insiders and hedge funds, and we believe small investors can benefit a lot from reading hedge fund investor letters and 13F filings.


Ken Griffin of Citadel Investment Group

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, we like undervalued, EBITDA-positive growth stocks, so we are checking out stock pitches like this emerging biotech stock. We go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. 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. You can subscribe to our free daily newsletter on our homepage. With all of this in mind we’re going to view the recent hedge fund action encompassing Air Products & Chemicals, Inc. (NYSE:APD).

Do Hedge Funds Think APD Is A Good Stock To Buy Now?

At the end of June, a total of 40 of the hedge funds tracked by Insider Monkey were long this stock, a change of 25% from one quarter earlier. On the other hand, there were a total of 37 hedge funds with a bullish position in APD a year ago. With hedge funds’ positions undergoing their usual ebb and flow, there exists a few noteworthy hedge fund managers who were adding to their holdings significantly (or already accumulated large positions).

Among these funds, Adage Capital Management held the most valuable stake in Air Products & Chemicals, Inc. (NYSE:APD), which was worth $69.5 million at the end of the second quarter. On the second spot was AQR Capital Management which amassed $66.3 million worth of shares. Citadel Investment Group, Millennium Management, and Osterweis 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 Bronson Point Partners allocated the biggest weight to Air Products & Chemicals, Inc. (NYSE:APD), around 6.6% of its 13F portfolio. Luminus Management is also relatively very bullish on the stock, earmarking 2.16 percent of its 13F equity portfolio to APD.

As one would reasonably expect, key hedge funds were leading the bulls’ herd. Renaissance Technologies, created the largest position in Air Products & Chemicals, Inc. (NYSE:APD). Renaissance Technologies had $35 million invested in the company at the end of the quarter. Ray Dalio’s Bridgewater Associates also made a $23.1 million investment in the stock during the quarter. The other funds with brand new APD positions are Israel Englander’s Millennium Management, Alec Litowitz and Ross Laser’s Magnetar Capital, and Benjamin A. Smith’s Laurion Capital Management.

Let’s go over hedge fund activity in other stocks similar to Air Products & Chemicals, Inc. (NYSE:APD). We will take a look at Analog Devices, Inc. (NASDAQ:ADI), Stellantis N.V. (NYSE:STLA), Banco Santander (Brasil) SA (NYSE:BSBR), Roku, Inc. (NASDAQ:ROKU), Boston Scientific Corporation (NYSE:BSX), Regeneron Pharmaceuticals Inc (NASDAQ:REGN), and Dominion Energy Inc. (NYSE:D). All of these stocks’ market caps resemble APD’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
ADI 62 5796275 12
STLA 28 844328 7
BSBR 7 9630 2
ROKU 61 5631958 -2
BSX 51 3029136 7
REGN 48 1595301 9
D 34 1262051 -5
Average 41.6 2595526 4.3

View table here if you experience formatting issues.

As you can see these stocks had an average of 41.6 hedge funds with bullish positions and the average amount invested in these stocks was $2596 million. That figure was $456 million in APD’s case. Analog Devices, Inc. (NASDAQ:ADI) is the most popular stock in this table. On the other hand Banco Santander (Brasil) SA (NYSE:BSBR) is the least popular one with only 7 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 overall hedge fund sentiment score for APD is 55.6. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 21.8% in 2021 through October 11th and surpassed the market again by 4.4 percentage points. Unfortunately APD wasn’t nearly as popular as these 5 stocks (hedge fund sentiment was quite bearish); APD investors were disappointed as the stock returned -6% since the end of June (through 10/11) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2021.

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