Is ACMR A Good Stock To Buy Now?

Many prominent investors, including Warren Buffett, David Tepper and Stan Druckenmiller, have been cautious regarding the current bull market and missed out as the stock market reached another high in recent weeks. On the other hand, technology hedge funds weren’t timid and registered double digit market beating gains. Financials, energy and industrial stocks aren’t doing great but many of the stocks that delivered strong returns since March are still going very strong and hedge funds actually increased their positions in these stocks. In this article we will find out how hedge fund sentiment to ACM Research, Inc. (NASDAQ:ACMR) changed recently.

Is ACMR a good stock to buy now? ACM Research, Inc. (NASDAQ:ACMR) was in 16 hedge funds’ portfolios at the end of September. The all time high for this statistic is 11. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. ACMR investors should pay attention to an increase in support from the world’s most elite money managers lately. There were 11 hedge funds in our database with ACMR holdings at the end of June. Our calculations also showed that ACMR isn’t among the 30 most popular stocks among hedge funds (click for Q3 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 was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 66 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’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 13% through November 17th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Lei Zhang Hillhouse Capital

Lei Zhang of Hillhouse Capital Management

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 15 best blue chip stocks to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our website. Now we’re going to go over the recent hedge fund action encompassing ACM Research, Inc. (NASDAQ:ACMR).

Do Hedge Funds Think ACMR Is A Good Stock To Buy Now?

At the end of September, a total of 16 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 45% from one quarter earlier. By comparison, 10 hedge funds held shares or bullish call options in ACMR a year ago. With hedgies’ capital changing hands, there exists an “upper tier” of notable hedge fund managers who were adding to their holdings substantially (or already accumulated large positions).

The largest stake in ACM Research, Inc. (NASDAQ:ACMR) was held by Indus Capital, which reported holding $78.2 million worth of stock at the end of September. It was followed by Discovery Capital Management with a $16.6 million position. Other investors bullish on the company included Hillhouse Capital Management, Kadensa Capital, and Millennium Management. In terms of the portfolio weights assigned to each position Indus Capital allocated the biggest weight to ACM Research, Inc. (NASDAQ:ACMR), around 11.55% of its 13F portfolio. Kadensa Capital is also relatively very bullish on the stock, setting aside 2.88 percent of its 13F equity portfolio to ACMR.

As industrywide interest jumped, some big names have been driving this bullishness. Discovery Capital Management, managed by Rob Citrone, created the largest position in ACM Research, Inc. (NASDAQ:ACMR). Discovery Capital Management had $16.6 million invested in the company at the end of the quarter. Lei Zhang’s Hillhouse Capital Management also made a $8.1 million investment in the stock during the quarter. The following funds were also among the new ACMR investors: Leung Chi Kit’s Kadensa Capital, Matthew Hulsizer’s PEAK6 Capital Management, and David Harding’s Winton Capital Management.

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as ACM Research, Inc. (NASDAQ:ACMR) but similarly valued. We will take a look at Columbia Property Trust Inc (NYSE:CXP), Xperi Holding Corporation (NASDAQ:XPER), Retail Properties of America Inc (NYSE:RPAI), CVR Energy, Inc. (NYSE:CVI), National Research Corporation (NASDAQ:NRC), LexinFintech Holdings Ltd. (NASDAQ:LX), and Fluor Corporation (NYSE:FLR). This group of stocks’ market valuations are similar to ACMR’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
CXP 15 47691 -1
XPER 23 96085 1
RPAI 10 38517 -1
CVI 18 937150 0
NRC 6 38451 -1
LX 10 11980 -4
FLR 17 84394 -3
Average 14.1 179181 -1.3

View table here if you experience formatting issues.

As you can see these stocks had an average of 14.1 hedge funds with bullish positions and the average amount invested in these stocks was $179 million. That figure was $130 million in ACMR’s case. Xperi Holding Corporation (NASDAQ:XPER) is the most popular stock in this table. On the other hand National Research Corporation (NASDAQ:NRC) is the least popular one with only 6 bullish hedge fund positions. ACM Research, Inc. (NASDAQ:ACMR) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for ACMR is 69.4. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. 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 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 30.7% in 2020 through December 14th and beat the market again by 15.8 percentage points. Unfortunately ACMR wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on ACMR were disappointed as the stock returned 6.7% since the end of September (through 12/14) 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.

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