Although the masses and most of the financial media blame hedge funds for their exorbitant fee structure and disappointing performance, these investors have proved to have great stock picking abilities over the years (that’s why their assets under management continue to swell). We believe hedge fund sentiment should serve as a crucial tool of an individual investor’s stock selection process, as it may offer great insights of how the brightest minds of the finance industry feel about specific stocks. After all, these people have access to smartest analysts and expensive data/information sources that individual investors can’t match. So should one consider investing in Advanced Micro Devices, Inc. (NASDAQ:AMD)? The smart money sentiment can provide an answer to this question.
Is Advanced Micro Devices (AMD) stock a buy or sell? The smart money was taking a bullish view. The number of long hedge fund positions improved by 3 recently. Advanced Micro Devices, Inc. (NASDAQ:AMD) was in 74 hedge funds’ portfolios at the end of the fourth quarter of 2020. The all time high for this statistic was previously 71. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that AMD isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings).
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 124 percentage points since March 2017 (see the details here).
At Insider Monkey we leave no stone unturned when looking for 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 10 best cheap stocks to buy now to pick the next Tesla that will deliver a 10x return. 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 homepage (or at the end of this article). Now we’re going to review the new hedge fund action surrounding Advanced Micro Devices, Inc. (NASDAQ:AMD).
Do Hedge Funds Think AMD Is A Good Stock To Buy Now?
At fourth quarter’s end, a total of 74 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 4% from the third quarter of 2020. The graph below displays the number of hedge funds with bullish position in AMD over the last 22 quarters. With hedgies’ positions undergoing their usual ebb and flow, there exists an “upper tier” of notable hedge fund managers who were increasing their stakes considerably (or already accumulated large positions).
More specifically, Arrowstreet Capital was the largest shareholder of Advanced Micro Devices, Inc. (NASDAQ:AMD), with a stake worth $944.1 million reported as of the end of December. Trailing Arrowstreet Capital was Fisher Asset Management, which amassed a stake valued at $842.2 million. D E Shaw, GQG Partners, and Viking Global 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 Andar Capital allocated the biggest weight to Advanced Micro Devices, Inc. (NASDAQ:AMD), around 13.23% of its 13F portfolio. Sylebra Capital Management is also relatively very bullish on the stock, designating 9.14 percent of its 13F equity portfolio to AMD.
With a general bullishness amongst the heavyweights, key hedge funds have jumped into Advanced Micro Devices, Inc. (NASDAQ:AMD) headfirst. Palestra Capital Management, managed by Andrew Immerman and Jeremy Schiffman, established the biggest position in Advanced Micro Devices, Inc. (NASDAQ:AMD). Palestra Capital Management had $153 million invested in the company at the end of the quarter. David Fiszel’s Honeycomb Asset Management also made a $48.6 million investment in the stock during the quarter. The other funds with brand new AMD positions are Wen Han Li’s Andar Capital, Frank Fu’s CaaS Capital, and Mario Gabelli’s GAMCO Investors.
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Advanced Micro Devices, Inc. (NASDAQ:AMD) but similarly valued. These stocks are TOTAL S.A. (NYSE:TOT), BlackRock, Inc. (NYSE:BLK), Raytheon Technologies Corp (NYSE:RTX), ServiceNow Inc (NYSE:NOW), HSBC Holdings plc (NYSE:HSBC), Intuit Inc. (NASDAQ:INTU), and Toronto-Dominion Bank (NYSE:TD). All of these stocks’ market caps are similar to AMD’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 46.6 hedge funds with bullish positions and the average amount invested in these stocks was $2415 million. That figure was $6689 million in AMD’s case. ServiceNow Inc (NYSE:NOW) is the most popular stock in this table. On the other hand TOTAL S.A. (NYSE:TOT) is the least popular one with only 14 bullish hedge fund positions. Advanced Micro Devices, Inc. (NASDAQ:AMD) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for AMD is 74.6. 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 30 most popular stocks among hedge funds returned 81.2% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 26 percentage points. These stocks gained 7% in 2021 through March 12th and beat the market again by 1.6 percentage points. Unfortunately AMD wasn’t nearly as popular as these 30 stocks and hedge funds that were betting on AMD were disappointed as the stock returned -11.6% since the end of December (through 3/12) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 30 most popular stocks among hedge funds as many of these stocks already outperformed the market since 2019.
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Disclosure: None. This article was originally published at Insider Monkey.