While the market driven by short-term sentiment influenced by the accomodative interest rate environment in the US, virus news and stimulus talks, many smart money investors are starting to get cautious towards the current bull run since March and hedging or reducing many of their long positions. Some fund managers are betting on Dow hitting 30,000 to generate strong returns. However, as we know, big investors usually buy stocks with strong fundamentals that can deliver gains both in bull and bear markets, which is why we believe we can profit from imitating them. In this article, we are going to take a look at the smart money sentiment surrounding Amplify Energy Corp. (NYSE:AMPY).
Is AMPY a good stock to buy now? Amplify Energy Corp. (NYSE:AMPY) was in 12 hedge funds’ portfolios at the end of the third quarter of 2020. The all time high for this statistics is 22. AMPY investors should pay attention to a decrease in enthusiasm from smart money of late. There were 18 hedge funds in our database with AMPY holdings at the end of June. Our calculations also showed that AMPY 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.
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 let’s take a glance at the recent hedge fund action surrounding Amplify Energy Corp. (NYSE:AMPY).
Do Hedge Funds Think AMPY Is A Good Stock To Buy Now?
At the end of September, a total of 12 of the hedge funds tracked by Insider Monkey were long this stock, a change of -33% from one quarter earlier. By comparison, 22 hedge funds held shares or bullish call options in AMPY a year ago. With hedge funds’ sentiment swirling, there exists an “upper tier” of key hedge fund managers who were adding to their holdings meaningfully (or already accumulated large positions).
The largest stake in Amplify Energy Corp. (NYSE:AMPY) was held by Fir Tree, which reported holding $8.2 million worth of stock at the end of September. It was followed by Avenue Capital with a $2.2 million position. Other investors bullish on the company included Brigade Capital, Oaktree Capital Management, and Winton Capital Management. In terms of the portfolio weights assigned to each position Avenue Capital allocated the biggest weight to Amplify Energy Corp. (NYSE:AMPY), around 1.41% of its 13F portfolio. Fir Tree is also relatively very bullish on the stock, dishing out 0.41 percent of its 13F equity portfolio to AMPY.
Since Amplify Energy Corp. (NYSE:AMPY) has witnessed bearish sentiment from the entirety of the hedge funds we track, it’s safe to say that there exists a select few funds that decided to sell off their entire stakes by the end of the third quarter. It’s worth mentioning that Donald Sussman’s Paloma Partners dumped the largest position of the “upper crust” of funds watched by Insider Monkey, valued at close to $0.1 million in stock, and Mark Kleiman’s Factorial Partners was right behind this move, as the fund said goodbye to about $0.1 million worth. These moves are intriguing to say the least, as aggregate hedge fund interest was cut by 6 funds by the end of the third quarter.
Let’s now take a look at hedge fund activity in other stocks similar to Amplify Energy Corp. (NYSE:AMPY). We will take a look at Monaker Group, Inc. (NASDAQ:MKGI), Superior Industries International Inc. (NYSE:SUP), Opiant Pharmaceuticals, Inc. (NASDAQ:OPNT), Unico American Corporation (NASDAQ:UNAM), CPI Aerostructures, Inc. (NYSE:CVU), BP Prudhoe Bay Royalty Trust (NYSE:BPT), and PHX Minerals Inc. (NYSE:PHX). This group of stocks’ market caps are similar to AMPY’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 3.9 hedge funds with bullish positions and the average amount invested in these stocks was $2 million. That figure was $13 million in AMPY’s case. Superior Industries International Inc. (NYSE:SUP) is the most popular stock in this table. On the other hand Unico American Corporation (NASDAQ:UNAM) is the least popular one with only 1 bullish hedge fund positions. Amplify Energy Corp. (NYSE:AMPY) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for AMPY is 65.4. 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. 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 32.9% in 2020 through December 8th and still beat the market by 16.2 percentage points. Hedge funds were also right about betting on AMPY as the stock returned 58.8% since the end of Q3 (through 12/8) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
Disclosure: None. This article was originally published at Insider Monkey.