Is Affiliated Managers Group, Inc. (AMG) A Good Stock To Buy?

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 Affiliated Managers Group, Inc. (NYSE:AMG)? The smart money sentiment can provide an answer to this question.

Is AMG a good stock to buy? The best stock pickers were in a pessimistic mood. The number of long hedge fund bets retreated by 1 lately. Affiliated Managers Group, Inc. (NYSE:AMG) was in 26 hedge funds’ portfolios at the end of the first quarter of 2021. The all time high for this statistic is 38. Our calculations also showed that AMG isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings). There were 27 hedge funds in our database with AMG positions at the end of the fourth quarter.

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 S&P 500 ETFs by more than 115 percentage points since March 2017 (see the details here). We have been able to outperform the passive index funds by tracking the moves of corporate insiders and hedge funds, and we believe small investors can benefit a lot from reading hedge fund investor letters and 13F filings.

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John Rogers of Ariel Investments

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, economists warn of inflation flare up. So, we are checking out this backdoor gold play that has hit peak gains of 718% in a little over a year. We go through lists like the 10 best battery stocks 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. Keeping this in mind let’s take a look at the latest hedge fund action regarding Affiliated Managers Group, Inc. (NYSE:AMG).

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

Heading into the second quarter of 2021, a total of 26 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -4% from the fourth quarter of 2020. By comparison, 27 hedge funds held shares or bullish call options in AMG a year ago. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

According to Insider Monkey’s hedge fund database, Mason Hawkins’s Southeastern Asset Management has the largest position in Affiliated Managers Group, Inc. (NYSE:AMG), worth close to $189.4 million, corresponding to 4.1% of its total 13F portfolio. Coming in second is Andrew Wellington and Jeff Keswin of Lyrical Asset Management, with a $164.8 million position; 1.9% of its 13F portfolio is allocated to the stock. Remaining members of the smart money that are bullish encompass John W. Rogers’s Ariel Investments, Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital and Lei Zhang’s Hillhouse Capital Management. In terms of the portfolio weights assigned to each position Southeastern Asset Management allocated the biggest weight to Affiliated Managers Group, Inc. (NYSE:AMG), around 4.05% of its 13F portfolio. Wallace Capital Management is also relatively very bullish on the stock, designating 3.59 percent of its 13F equity portfolio to AMG.

Due to the fact that Affiliated Managers Group, Inc. (NYSE:AMG) has witnessed declining sentiment from the aggregate hedge fund industry, it’s easy to see that there lies a certain “tier” of money managers that slashed their positions entirely in the first quarter. Intriguingly, Daniel Johnson’s Gillson Capital dropped the largest investment of all the hedgies tracked by Insider Monkey, comprising about $14.4 million in stock, and Ryan Tolkin (CIO)’s Schonfeld Strategic Advisors was right behind this move, as the fund cut about $7.2 million worth. These transactions are important to note, as aggregate hedge fund interest was cut by 1 funds in the first quarter.

Let’s go over hedge fund activity in other stocks similar to Affiliated Managers Group, Inc. (NYSE:AMG). These stocks are Dada Nexus Limited (NASDAQ:DADA), Landstar System, Inc. (NASDAQ:LSTR), Ionis Pharmaceuticals, Inc. (NASDAQ:IONS), Elbit Systems Ltd. (NASDAQ:ESLT), Pan American Silver Corp. (NASDAQ:PAAS), YETI Holdings, Inc. (NYSE:YETI), and BlackLine, Inc. (NASDAQ:BL). All of these stocks’ market caps match AMG’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
DADA 21 157587 -4
LSTR 15 166365 -3
IONS 23 541031 -5
ESLT 3 50211 -2
PAAS 27 352324 0
YETI 30 159366 11
BL 24 271832 1
Average 20.4 242674 -0.3

View table here if you experience formatting issues.

As you can see these stocks had an average of 20.4 hedge funds with bullish positions and the average amount invested in these stocks was $243 million. That figure was $725 million in AMG’s case. YETI Holdings, Inc. (NYSE:YETI) is the most popular stock in this table. On the other hand Elbit Systems Ltd. (NASDAQ:ESLT) is the least popular one with only 3 bullish hedge fund positions. Affiliated Managers Group, Inc. (NYSE:AMG) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for AMG is 67.1. 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. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 24% in 2021 through July 9th and still beat the market by 6.7 percentage points. Hedge funds were also right about betting on AMG as the stock returned 18.6% since the end of Q1 (through 7/9) and outperformed the market. Hedge funds were rewarded for their relative bullishness.

Follow Affiliated Managers Group Inc. (NYSE:AMG)

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