Looking for high-potential stocks? Just follow the big players within the hedge fund industry. Why should you do so? Let’s take a brief look at what statistics have to say about hedge funds’ stock picking abilities to illustrate. The Standard and Poor’s 500 Index returned approximately 7.6% in the 12 months ending November 21, with more than 51% of the stocks in the index failing to beat the benchmark. Therefore, the odds that one will pin down a winner by randomly picking a stock are less than the odds in a fair coin-tossing game. Conversely, best performing hedge funds’ 30 preferred mid-cap stocks generated a return of 18% during the same 12-month period. Coincidence? It might happen to be so, but it is unlikely. Our research covering a 17-year period indicates that hedge funds’ stock picks generate superior risk-adjusted returns. That’s why we believe it is wise to check hedge fund activity before you invest your time or your savings on a stock like Albany Molecular Research, Inc. (NASDAQ:AMRI).
Albany Molecular Research, Inc. (NASDAQ:AMRI) was in 13 hedge funds’ portfolios at the end of the third quarter of 2016. AMRI shareholders have witnessed an increase in hedge fund interest lately. There were 12 hedge funds in our database with AMRI holdings at the end of the second quarter. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Greenhill & Co., Inc. (NYSE:GHL), Rudolph Technologies Inc (NYSE:RTEC), and National Storage Affiliates Trust (NYSE:NSA) to gather more data points.
At Insider Monkey, we’ve developed an investment strategy that has delivered market-beating returns over the past 12 months. Our strategy identifies the 100 best-performing funds of the previous quarter from among the collection of 700+ successful funds that we track in our database, which we accomplish using our returns methodology. We then study the portfolios of those 100 funds using the latest 13F data to uncover the 30 most popular mid-cap stocks (market caps of between $1 billion and $10 billion) among them to hold until the next filing period. This strategy delivered 18% gains over the past 12 months, more than doubling the 8% returns enjoyed by the S&P 500 ETFs.
How are hedge funds trading Albany Molecular Research, Inc. (NASDAQ:AMRI)?
At the end of the third quarter, a total of 13 of the hedge funds tracked by Insider Monkey were long this stock, an 8% increase from the previous quarter. The graph below displays the number of hedge funds with bullish position in AMRI over the last 5 quarters, which shows a decline in positions during that time, despite the Q3 boost. With hedgies’ capital changing hands, there exists a select group of noteworthy hedge fund managers who were upping their holdings substantially (or already accumulated large positions).
Of the funds tracked by Insider Monkey, Permian Investment Partners, led by Alex Duran and Scott Hendrickson, holds the biggest position in Albany Molecular Research, Inc. (NASDAQ:AMRI). Permian Investment Partners has a $50.5 million position in the stock, comprising 9.7% of its 13F portfolio. Sitting at the No. 2 spot is Royce & Associates, led by Chuck Royce, which holds a $20.7 million position. Remaining peers that are bullish encompass Charles Clough’s Clough Capital Partners, Jim Simons’ Renaissance Technologies, and Ken Fisher’s Fisher Asset Management. We should note that none of these hedge funds are among our list of the 100 best performing hedge funds which is based on the performance of their 13F long positions in non-microcap stocks.
As one would reasonably expect, key money managers have been driving this bullishness. Cove Street Capital, led by Jeffrey Bronchick, initiated the largest position in Albany Molecular Research, Inc. (NASDAQ:AMRI). Cove Street Capital had $2 million invested in the company at the end of the quarter. Joseph Edelman’s Perceptive Advisors also made a $0.2 million investment in the stock during the quarter. The only other fund with a brand new AMRI position is Gavin Saitowitz and Cisco J. del Valle’s Springbok Capital.
Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Albany Molecular Research, Inc. (NASDAQ:AMRI) but similarly valued. These stocks are Greenhill & Co., Inc. (NYSE:GHL), Rudolph Technologies Inc (NYSE:RTEC), National Storage Affiliates Trust (NYSE:NSA), and Otonomy Inc (NASDAQ:OTIC). This group of stocks’ market caps are closest to AMRI’s market cap.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
As you can see these stocks had an average of 15 hedge funds with bullish positions and the average amount invested in these stocks was $87 million. That figure was $93 million in AMRI’s case. Rudolph Technologies Inc (NYSE:RTEC) is the most popular stock in this table. On the other hand Otonomy Inc (NASDAQ:OTIC) is the least popular one with only 11 bullish hedge fund positions. Albany Molecular Research, Inc. (NASDAQ:AMRI) 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. In this regard RTEC might be a better candidate to consider taking a long position in.