How Did Agilent Technologies Inc. (A) Compare Against Top Hedge Fund Stocks in 2019?

While the market driven by short-term sentiment influenced by the accomodative interest rate environment in the US, increasing oil prices and deteriorating expectations towards the resolution of the trade war with China, many smart money investors kept their cautious approach regarding the current bull run in the third quarter and hedging or reducing many of their long positions. Some fund managers are betting on Dow hitting 40,000 to generate strong returns. However, as we know, big investors usually buy stocks with strong fundamentals that can deliver gains both in bull and bear markets, which is why we believe we can profit from imitating them. In this article, we are going to take a look at the smart money sentiment surrounding Agilent Technologies Inc. (NYSE:A) and see how the stock performed in comparison to hedge funds’ consensus picks.

Agilent Technologies Inc. (NYSE:A) shareholders have witnessed a decrease in enthusiasm from smart money recently. Our calculations also showed that A isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video at the end of this article for Q2 rankings).

In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s flagship best performing hedge funds strategy returned 91% since May 2014 and outperformed the Russell 2000 ETFs by nearly 40 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

William Von Mueffling - Cantillon Capital Management

William Von Mueffling of Cantillon Capital Management

We leave no stone unturned when looking for the next great investment idea. For example one of the most bullish analysts in America just put his money where his mouth is. He says, “I’m investing more today than I did back in early 2009.” So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. This December, we recommended Adams Energy as a one-way bet based on an under-the-radar fund manager’s investor letter and the stock is still extremely cheap despite already gaining 20 percent. Keeping this in mind we’re going to go over the key hedge fund action regarding Agilent Technologies Inc. (NYSE:A).

Hedge fund activity in Agilent Technologies Inc. (NYSE:A)

Heading into the fourth quarter of 2019, a total of 37 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -5% from the second quarter of 2019. On the other hand, there were a total of 40 hedge funds with a bullish position in A a year ago. With hedgies’ positions undergoing their usual ebb and flow, there exists a select group of noteworthy hedge fund managers who were boosting their stakes significantly (or already accumulated large positions).

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, David E. Shaw’s D E Shaw has the number one position in Agilent Technologies Inc. (NYSE:A), worth close to $386.4 million, corresponding to 0.5% of its total 13F portfolio. Coming in second is Cantillon Capital Management, managed by William von Mueffling, which holds a $323.1 million position; 3.1% of its 13F portfolio is allocated to the company. Some other peers that hold long positions contain Ian Simm’s Impax Asset Management, Tim Hurd and Ed Magnus’s BlueSpruce Investments and Cliff Asness’s AQR Capital Management. In terms of the portfolio weights assigned to each position BlueSpruce Investments allocated the biggest weight to Agilent Technologies Inc. (NYSE:A), around 6.8% of its 13F portfolio. Impax Asset Management is also relatively very bullish on the stock, dishing out 3.17 percent of its 13F equity portfolio to A.

Since Agilent Technologies Inc. (NYSE:A) has faced bearish sentiment from the smart money, it’s safe to say that there was a specific group of money managers that slashed their positions entirely last quarter. Intriguingly, Samuel Isaly’s OrbiMed Advisors sold off the biggest investment of the “upper crust” of funds followed by Insider Monkey, totaling close to $66.7 million in stock. Kris Jenner, Gordon Bussard, Graham McPhail’s fund, Rock Springs Capital Management, also sold off its stock, about $13.7 million worth. These moves are intriguing to say the least, as total hedge fund interest dropped by 2 funds last quarter.

Let’s go over hedge fund activity in other stocks similar to Agilent Technologies Inc. (NYSE:A). We will take a look at IDEXX Laboratories, Inc. (NASDAQ:IDXX), Hormel Foods Corporation (NYSE:HRL), Entergy Corporation (NYSE:ETR), and Chipotle Mexican Grill, Inc. (NYSE:CMG). This group of stocks’ market values are closest to A’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
IDXX 29 509187 -8
HRL 19 190410 3
ETR 25 1677907 -5
CMG 38 4057541 1
Average 27.75 1608761 -2.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 27.75 hedge funds with bullish positions and the average amount invested in these stocks was $1609 million. That figure was $1858 million in A’s case. Chipotle Mexican Grill, Inc. (NYSE:CMG) is the most popular stock in this table. On the other hand Hormel Foods Corporation (NYSE:HRL) is the least popular one with only 19 bullish hedge fund positions. Agilent Technologies Inc. (NYSE:A) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.1% in 2019 through December 23rd and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. Unfortunately A wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on A were disappointed as the stock returned 27.2% in 2019 (through December 23rd) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

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