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Hedge Funds Cautiously Watching Atento SA (ATTO)

Before we spend countless hours researching a company, we like to analyze what insiders, hedge funds and billionaire investors think of the stock first. This is a necessary first step in our investment process because our research has shown that the elite investors’ consensus returns have been exceptional. In the following paragraphs, we find out what the billionaire investors and hedge funds think of Atento SA (NYSE:ATTO).

Hedge fund interest in Atento SA (NYSE:ATTO) shares was flat at the end of last quarter. This is usually a negative indicator. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Vermillion, Inc. (NASDAQ:VRML), Moneygram International Inc (NYSE:MGI), and Old Point Financial Corporation (NASDAQ:OPOF) to gather more data points. Our calculations also showed that ATTO 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 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.

John Overdeck of Two Sigma

John Overdeck of Two Sigma Advisors

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, 2020’s unprecedented market conditions provide us with the highest number of trading opportunities in a decade. So we are checking out stocks recommended/scorned by legendary Bill Miller. 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. Keeping this in mind let’s take a gander at the latest hedge fund action encompassing Atento SA (NYSE:ATTO).

Hedge fund activity in Atento SA (NYSE:ATTO)

At Q1’s end, a total of 6 of the hedge funds tracked by Insider Monkey were long this stock, a change of 0% from the previous quarter. On the other hand, there were a total of 9 hedge funds with a bullish position in ATTO a year ago. With the smart money’s positions undergoing their usual ebb and flow, there exists a select group of key hedge fund managers who were increasing their holdings significantly (or already accumulated large positions).

Is ATTO A Good Stock To Buy?

Among these funds, Arrowstreet Capital held the most valuable stake in Atento SA (NYSE:ATTO), which was worth $0.1 million at the end of the third quarter. On the second spot was Two Sigma Advisors which amassed $0.1 million worth of shares. Royce & Associates, Citadel Investment Group, and Renaissance Technologies 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 Royce & Associates allocated the biggest weight to Atento SA (NYSE:ATTO), around 0.0016% of its 13F portfolio. Two Sigma Advisors is also relatively very bullish on the stock, designating 0.0005 percent of its 13F equity portfolio to ATTO.

Since Atento SA (NYSE:ATTO) has experienced falling interest from the aggregate hedge fund industry, it’s easy to see that there was a specific group of fund managers that slashed their entire stakes heading into Q4. Interestingly, Ali Motamed’s Invenomic Capital Management sold off the largest investment of the 750 funds tracked by Insider Monkey, comprising close to $1 million in stock. Gavin Saitowitz and Cisco J. del Valle’s fund, Springbok Capital, also sold off its stock, about $0 million worth. These moves are interesting, as total hedge fund interest stayed the same (this is a bearish signal in our experience).

Let’s now review hedge fund activity in other stocks similar to Atento SA (NYSE:ATTO). These stocks are Vermillion, Inc. (NASDAQ:VRML), Moneygram International Inc (NYSE:MGI), Old Point Financial Corporation (NASDAQ:OPOF), and Ultralife Corp. (NASDAQ:ULBI). This group of stocks’ market values are closest to ATTO’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
VRML 4 2826 0
MGI 8 3009 -6
OPOF 3 4530 -1
ULBI 3 1619 0
Average 4.5 2996 -1.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 4.5 hedge funds with bullish positions and the average amount invested in these stocks was $3 million. That figure was $1 million in ATTO’s case. Moneygram International Inc (NYSE:MGI) is the most popular stock in this table. On the other hand Old Point Financial Corporation (NASDAQ:OPOF) is the least popular one with only 3 bullish hedge fund positions. Atento SA (NYSE:ATTO) is not the most popular stock in this group but hedge fund interest is still above 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 13.9% in 2020 through June 10th but still beat the market by 14.2 percentage points. Hedge funds were also right about betting on ATTO as the stock returned 36.4% in Q2 (through June 10th) and outperformed the market. Hedge funds were rewarded for their relative bullishness.

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