In this article you are going to find out whether hedge funds think Ampco-Pittsburgh Corp. (NYSE:AP) 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.
Is Ampco-Pittsburgh Corp. (NYSE:AP) worth your attention right now? The smart money is selling. The number of bullish hedge fund bets shrunk by 2 in recent months. Our calculations also showed that AP 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.
Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. 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 44 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.
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, legendary investor Bill Miller told investors to sell 7 extremely popular recession stocks last month. So, we went through his list and recommended another stock with 100% upside potential instead. We interview hedge fund managers and ask them about their best ideas. You can watch our latest hedge fund manager interview here and find out the name of the large-cap healthcare stock that Sio Capital’s Michael Castor expects to double. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Now we’re going to view the new hedge fund action surrounding Ampco-Pittsburgh Corp. (NYSE:AP).
How are hedge funds trading Ampco-Pittsburgh Corp. (NYSE:AP)?
At the end of the first quarter, a total of 3 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -40% from the previous quarter. By comparison, 5 hedge funds held shares or bullish call options in AP a year ago. With the smart money’s sentiment swirling, there exists a few noteworthy hedge fund managers who were upping their stakes considerably (or already accumulated large positions).
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, GAMCO Investors, managed by Mario Gabelli, holds the biggest position in Ampco-Pittsburgh Corp. (NYSE:AP). GAMCO Investors has a $3.6 million position in the stock, comprising less than 0.1%% of its 13F portfolio. Coming in second is Renaissance Technologies, which holds a $1.3 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. In terms of the portfolio weights assigned to each position GAMCO Investors allocated the biggest weight to Ampco-Pittsburgh Corp. (NYSE:AP), around 0.04% of its 13F portfolio. Royce & Associates is also relatively very bullish on the stock, dishing out 0.0027 percent of its 13F equity portfolio to AP.
Seeing as Ampco-Pittsburgh Corp. (NYSE:AP) has faced declining sentiment from the entirety of the hedge funds we track, it’s easy to see that there exists a select few hedgies that slashed their entire stakes in the third quarter. Interestingly, Prem Watsa’s Fairfax Financial Holdings cut the largest stake of the “upper crust” of funds watched by Insider Monkey, worth an estimated $0.8 million in stock, and Frederick DiSanto’s Ancora Advisors was right behind this move, as the fund said goodbye to about $0.1 million worth. These bearish behaviors are interesting, as aggregate hedge fund interest dropped by 2 funds in the third quarter.
Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Ampco-Pittsburgh Corp. (NYSE:AP) but similarly valued. We will take a look at Air Industries Group (NYSE:AIRI), Mogo Inc. (NASDAQ:MOGO), Advaxis, Inc. (NASDAQ:ADXS), and Key Tronic Corporation (NASDAQ:KTCC). This group of stocks’ market caps are closest to AP’s market cap.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
View table here if you experience formatting issues.
As you can see these stocks had an average of 1.5 hedge funds with bullish positions and the average amount invested in these stocks was $1 million. That figure was $5 million in AP’s case. Mogo Inc. (NASDAQ:MOGO) is the most popular stock in this table. On the other hand Air Industries Group (NYSE:AIRI) is the least popular one with only 1 bullish hedge fund positions. Compared to these stocks Ampco-Pittsburgh Corp. (NYSE:AP) is more popular among hedge funds. 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 returned 7.9% in 2020 through May 22nd but still managed to beat the market by 15.6 percentage points. Hedge funds were also right about betting on AP as the stock returned 31.2% so far in Q2 (through May 22nd) and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.
Disclosure: None. This article was originally published at Insider Monkey.