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Is American Greetings Corporation (AM) Going to Burn These Hedge Funds?

World-class money managers like Ken Griffin and Barry Rosenstein only invest their wealthy clients’ money after undertaking a rigorous examination of any potential stock. They are particularly successful in this regard when it comes to small-cap stocks, which their peerless research gives them a big information advantage on when it comes to judging their worth. It’s not surprising then that they generate their biggest returns from these stocks and invest more of their money in these stocks on average than other investors. It’s also not surprising then that we pay close attention to these picks ourselves and have built a market-beating investment strategy around them.

Is American Greetings Corporation (NYSE:AM) a superb investment today? Money managers are turning bullish. The number of bullish hedge fund positions improved by 4 lately. Our calculations also showed that am isn’t among the 30 most popular stocks among hedge funds.

In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s flagship best performing hedge funds strategy returned 6.3% year to date (through December 3rd) and outperformed the market even though it draws its stock picks among small-cap stocks. This strategy also outperformed the market by 18 percentage points since its inception (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

PENNANT CAPITAL MANAGEMENT

We’re going to take a look at the key hedge fund action encompassing American Greetings Corporation (NYSE:AM).

Hedge fund activity in American Greetings Corporation (NYSE:AM)

At the end of the third quarter, a total of 11 of the hedge funds tracked by Insider Monkey were long this stock, a change of 57% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in AM over the last 13 quarters. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

No of Hedge Funds with AM Positions

The largest stake in American Greetings Corporation (NYSE:AM) was held by Pennant Capital Management, which reported holding $11.5 million worth of stock at the end of September. It was followed by Perella Weinberg Partners with a $10.2 million position. Other investors bullish on the company included Mountain Lake Investment Management, Osterweis Capital Management, and Citadel Investment Group.

As aggregate interest increased, some big names have jumped into American Greetings Corporation (NYSE:AM) headfirst. Pennant Capital Management, managed by Alan Fournier, initiated the largest position in American Greetings Corporation (NYSE:AM). Pennant Capital Management had $11.5 million invested in the company at the end of the quarter. Stuart J. Zimmer’s Zimmer Partners also made a $6.7 million investment in the stock during the quarter. The other funds with new positions in the stock are Richard Driehaus’s Driehaus Capital, Ken Griffin’s Citadel Investment Group, and T Boone Pickens’s BP Capital.

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Antero Midstream Partners LP (NYSE:AM) but similarly valued. These stocks are The Howard Hughes Corporation (NYSE:HHC), Itau CorpBanca (NYSE:ITCB), New Relic Inc (NYSE:NEWR), and Planet Fitness Inc (NYSE:PLNT). This group of stocks’ market values are similar to AM’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
HHC 19 715682 0
ITCB 1 4986 0
NEWR 28 516769 8
PLNT 32 505526 8
Average 20 435741 4

View table here if you experience formatting issues.

As you can see these stocks had an average of 20 hedge funds with bullish positions and the average amount invested in these stocks was $436 million. That figure was $52 million in AM’s case. Planet Fitness Inc (NYSE:PLNT) is the most popular stock in this table. On the other hand Itau CorpBanca (NYSE:ITCB) is the least popular one with only 1 bullish hedge fund positions. Antero Midstream Partners LP (NYSE:AM) 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 PLNT might be a better candidate to consider a long position.

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

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