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Hedge Funds Aren’t Done Buying AECOM (ACM)

In this article we will check out the progression of hedge fund sentiment towards AECOM (NYSE:ACM) and determine whether it is a good investment right now. We at Insider Monkey like to examine what billionaires and hedge funds think of a company before spending days of research on it. Given their 2 and 20 payment structure, hedge funds have more incentives and resources than the average investor. The funds have access to expert networks and get tips from industry insiders. They also employ numerous Ivy League graduates and MBAs. Like everyone else, hedge funds perform miserably at times, but their consensus picks have historically outperformed the market after risk adjustments.

AECOM (NYSE:ACM) was in 39 hedge funds’ portfolios at the end of March. ACM shareholders have witnessed an increase in activity from the world’s largest hedge funds lately. There were 36 hedge funds in our database with ACM positions at the end of the previous quarter. Our calculations also showed that ACM 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 51 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.

Zilvinas Zach Mecelis Covalis Capital

Zilvinas Mecelis of Covalis Capital

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, we believe electric vehicles and energy storage are set to become giant markets, and we want to take advantage of the declining lithium prices amid the COVID-19 pandemic. So we are checking out investment opportunities like this one. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. 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 the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Now let’s check out the fresh hedge fund action regarding AECOM (NYSE:ACM).

What have hedge funds been doing with AECOM (NYSE:ACM)?

At the end of the first quarter, a total of 39 of the hedge funds tracked by Insider Monkey were long this stock, a change of 8% from the fourth quarter of 2019. On the other hand, there were a total of 21 hedge funds with a bullish position in ACM a year ago. With hedgies’ positions undergoing their usual ebb and flow, there exists a select group of key hedge fund managers who were boosting their stakes substantially (or already accumulated large positions).

More specifically, Starboard Value LP was the largest shareholder of AECOM (NYSE:ACM), with a stake worth $178.4 million reported as of the end of September. Trailing Starboard Value LP was Renaissance Technologies, which amassed a stake valued at $134.4 million. Citadel Investment Group, Pzena Investment Management, and TIG Advisors 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 Starboard Value LP allocated the biggest weight to AECOM (NYSE:ACM), around 7.23% of its 13F portfolio. Engine Capital is also relatively very bullish on the stock, setting aside 7.15 percent of its 13F equity portfolio to ACM.

With a general bullishness amongst the heavyweights, some big names were leading the bulls’ herd. TIG Advisors, managed by Carl Tiedemann and Michael Tiedemann, established the most outsized position in AECOM (NYSE:ACM). TIG Advisors had $25.6 million invested in the company at the end of the quarter. Brandon Haley’s Holocene Advisors also made a $11.9 million investment in the stock during the quarter. The following funds were also among the new ACM investors: Zilvinas Mecelis’s Covalis Capital, Asad Rahman and Aman Kapadia’s Akaris Global Partners, and Andrew Byington’s Appian Way Asset Management.

Let’s check out hedge fund activity in other stocks similar to AECOM (NYSE:ACM). We will take a look at Paylocity Holding Corp (NASDAQ:PCTY), GFL Environmental Inc. (NYSE:GFL), Five9 Inc (NASDAQ:FIVN), and Columbia Sportswear Company (NASDAQ:COLM). This group of stocks’ market values are similar to ACM’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
PCTY 33 409592 7
GFL 10 150736 10
FIVN 33 715609 -2
COLM 15 51797 -8
Average 22.75 331934 1.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 22.75 hedge funds with bullish positions and the average amount invested in these stocks was $332 million. That figure was $671 million in ACM’s case. Paylocity Holding Corp (NASDAQ:PCTY) is the most popular stock in this table. On the other hand GFL Environmental Inc. (NYSE:GFL) is the least popular one with only 10 bullish hedge fund positions. Compared to these stocks AECOM (NYSE:ACM) 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 8.3% in 2020 through the end of May but still managed to beat the market by 13.2 percentage points. Hedge funds were also right about betting on ACM as the stock returned 29.9% so far in Q2 (through the end of May) 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.

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

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