“Since 2006, value stocks (IVE vs IVW) have underperformed 11 of the 13 calendar years and when they beat growth, it wasn’t by much. Cumulatively, through this week, it has been a 122% differential (up 52% for value vs up 174% for growth). This appears to be the longest and most severe drought for value investors since data collection began. It will go our way eventually as there are too many people paying far too much for today’s darlings, both public and private. Further, the ten-year yield of 2.5% (pre-tax) isn’t attractive nor is real estate. We believe the value part of the global equity market is the only place to earn solid risk adjusted returns and we believe those returns will be higher than normal,” said Vilas Fund in its Q1 investor letter. We aren’t sure whether value stocks outperform growth, but we follow hedge fund investor letters to understand where the markets and stocks might be going. This article will lay out and discuss the hedge fund and institutional investor sentiment towards Artisan Partners Asset Management Inc (NYSE:APAM).
Hedge fund interest in Artisan Partners Asset Management Inc (NYSE:APAM) 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 NeoGenomics, Inc. (NASDAQ:NEO), Comfort Systems USA, Inc. (NYSE:FIX), and 8×8, Inc. (NASDAQ:EGHT) to gather more data points.
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 market by 40 percentage points since May 2014 through May 30, 2019 (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. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in our short portfolio.
Let’s go over the latest hedge fund action regarding Artisan Partners Asset Management Inc (NYSE:APAM).
Hedge fund activity in Artisan Partners Asset Management Inc (NYSE:APAM)
At the end of the first quarter, a total of 16 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 0% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in APAM over the last 15 quarters. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Renaissance Technologies was the largest shareholder of Artisan Partners Asset Management Inc (NYSE:APAM), with a stake worth $59 million reported as of the end of March. Trailing Renaissance Technologies was Fisher Asset Management, which amassed a stake valued at $38.1 million. Royce & Associates, Marshall Wace LLP, and Sprott Asset Management were also very fond of the stock, giving the stock large weights in their portfolios.
Judging by the fact that Artisan Partners Asset Management Inc (NYSE:APAM) has experienced declining sentiment from the entirety of the hedge funds we track, logic holds that there lies a certain “tier” of hedge funds that slashed their positions entirely heading into Q3. At the top of the heap, D. E. Shaw’s D E Shaw dumped the biggest investment of the “upper crust” of funds tracked by Insider Monkey, comprising close to $0.8 million in stock, and Michael Platt and William Reeves’s BlueCrest Capital Mgmt. was right behind this move, as the fund dropped about $0.3 million worth. These bearish behaviors are intriguing to say the least, as total hedge fund interest stayed the same (this is a bearish signal in our experience).
Let’s also examine hedge fund activity in other stocks similar to Artisan Partners Asset Management Inc (NYSE:APAM). We will take a look at NeoGenomics, Inc. (NASDAQ:NEO), Comfort Systems USA, Inc. (NYSE:FIX), 8×8, Inc. (NYSE:EGHT), and Fabrinet (NYSE:FN). All of these stocks’ market caps match APAM’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 20.75 hedge funds with bullish positions and the average amount invested in these stocks was $164 million. That figure was $168 million in APAM’s case. Comfort Systems USA, Inc. (NYSE:FIX) is the most popular stock in this table. On the other hand NeoGenomics, Inc. (NASDAQ:NEO) is the least popular one with only 15 bullish hedge fund positions. Artisan Partners Asset Management Inc (NYSE:APAM) is not the least popular stock in this group but hedge fund interest is still below average. Our calculations showed that top 20 most popular stocks among hedge funds returned 6.2% in Q2 through June 19th and outperformed the S&P 500 ETF (SPY) by nearly 3 percentage points. A small number of hedge funds were also right about betting on APAM as the stock returned 8.7% during the same time frame and outperformed the market by an even larger margin.
Disclosure: None. This article was originally published at Insider Monkey.