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Is ABM Industries Incorporated (ABM) Going To Burn These Hedge Funds?

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 ABM Industries Incorporated (NYSE:ABM).

Is ABM Industries Incorporated (NYSE:ABM) a marvelous investment now? Money managers are turning bullish. The number of bullish hedge fund bets improved by 2 lately. Our calculations also showed that ABM isn’t among the 30 most popular stocks among hedge funds (view the video below).
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that hedge funds’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were 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’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 25.7% through September 30, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

GOTHAM ASSET MANAGEMENT

Unlike former hedge manager, Dr. Steve Sjuggerud, who is convinced Dow will soar past 40000, our long-short investment strategy doesn’t rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. We’re going to take a glance at the key hedge fund action surrounding ABM Industries Incorporated (NYSE:ABM).

How have hedgies been trading ABM Industries Incorporated (NYSE:ABM)?

Heading into the third quarter of 2019, a total of 10 of the hedge funds tracked by Insider Monkey were long this stock, a change of 25% from the first quarter of 2019. By comparison, 14 hedge funds held shares or bullish call options in ABM a year ago. With hedge funds’ positions undergoing their usual ebb and flow, there exists an “upper tier” of notable hedge fund managers who were adding to their holdings considerably (or already accumulated large positions).

No of Hedge Funds with ABM Positions

When looking at the institutional investors followed by Insider Monkey, Royce & Associates, managed by Chuck Royce, holds the biggest position in ABM Industries Incorporated (NYSE:ABM). Royce & Associates has a $14.1 million position in the stock, comprising 0.1% of its 13F portfolio. Coming in second is Peter Rathjens, Bruce Clarke and John Campbell of Arrowstreet Capital, with a $12.6 million position; less than 0.1%% of its 13F portfolio is allocated to the company. Other professional money managers that are bullish comprise Noam Gottesman’s GLG Partners, Dmitry Balyasny’s Balyasny Asset Management and Joel Greenblatt’s Gotham Asset Management.

Consequently, specific money managers were leading the bulls’ herd. AQR Capital Management, managed by Cliff Asness, assembled the most outsized position in ABM Industries Incorporated (NYSE:ABM). AQR Capital Management had $0.9 million invested in the company at the end of the quarter. Mike Vranos’s Ellington also initiated a $0.2 million position during the quarter. The only other fund with a new position in the stock is Steve Cohen’s Point72 Asset Management.

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as ABM Industries Incorporated (NYSE:ABM) but similarly valued. These stocks are PTC Therapeutics, Inc. (NASDAQ:PTCT), Crestwood Equity Partners LP (NYSE:CEQP), Pampa Energia S.A. (NYSE:PAM), and Avis Budget Group Inc. (NASDAQ:CAR). This group of stocks’ market valuations are similar to ABM’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
PTCT 28 706661 -3
CEQP 4 21805 0
PAM 12 307774 -9
CAR 21 1045588 -7
Average 16.25 520457 -4.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 16.25 hedge funds with bullish positions and the average amount invested in these stocks was $520 million. That figure was $39 million in ABM’s case. PTC Therapeutics, Inc. (NASDAQ:PTCT) is the most popular stock in this table. On the other hand Crestwood Equity Partners LP (NYSE:CEQP) is the least popular one with only 4 bullish hedge fund positions. ABM Industries Incorporated (NYSE:ABM) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and 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 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Unfortunately ABM wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); ABM investors were disappointed as the stock returned -8.8% during the third quarter 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 in 2019.

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

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