Most investors tend to think that hedge funds and other asset managers are worthless, as they cannot beat even simple index fund portfolios. In fact, most people expect hedge funds to compete with and outperform the bull market that we have witnessed in recent years. However, hedge funds are generally partially hedged and aim at delivering attractive risk-adjusted returns rather than following the ups and downs of equity markets hoping that they will outperform the broader market. Our research shows that certain hedge funds do have great stock picking skills (and we can identify these hedge funds in advance pretty accurately), so let’s take a glance at the smart money sentiment towards American Tower Corporation (NYSE:AMT).
Is AMT a good stock to buy now? American Tower Corporation (NYSE:AMT) was in 62 hedge funds’ portfolios at the end of the third quarter of 2020. The all time high for this statistics is 61. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. AMT shareholders have witnessed an increase in hedge fund sentiment lately. There were 61 hedge funds in our database with AMT holdings at the end of June. Our calculations also showed that AMT 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.
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 monthly stock picks returned 113% since March 2017 and outperformed the S&P 500 ETFs by more than 66 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a 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 5 best cheap stocks to buy according to Ray Dalio to identify stocks with upside potential. 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. Keeping this in mind let’s take a gander at the fresh hedge fund action surrounding American Tower Corporation (NYSE:AMT).
How are hedge funds trading American Tower Corporation (NYSE:AMT)?
At Q3’s end, a total of 62 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 2% from the second quarter of 2020. By comparison, 52 hedge funds held shares or bullish call options in AMT a year ago. So, let’s see 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, Akre Capital Management, managed by Charles Akre, holds the largest position in American Tower Corporation (NYSE:AMT). Akre Capital Management has a $1.7002 billion position in the stock, comprising 12% of its 13F portfolio. Coming in second is William von Mueffling of Cantillon Capital Management, with a $501.9 million position; the fund has 4.2% of its 13F portfolio invested in the stock. Some other hedge funds and institutional investors that hold long positions contain Ken Fisher’s Fisher Asset Management, Panayotis Takis Sparaggis’s Alkeon Capital Management and Stuart J. Zimmer’s Zimmer Partners. In terms of the portfolio weights assigned to each position Akre Capital Management allocated the biggest weight to American Tower Corporation (NYSE:AMT), around 11.99% of its 13F portfolio. Heard Capital is also relatively very bullish on the stock, dishing out 9.79 percent of its 13F equity portfolio to AMT.
Now, specific money managers were breaking ground themselves. Balyasny Asset Management, managed by Dmitry Balyasny, initiated the most valuable position in American Tower Corporation (NYSE:AMT). Balyasny Asset Management had $19.2 million invested in the company at the end of the quarter. Paul Marshall and Ian Wace’s Marshall Wace LLP also made a $11.5 million investment in the stock during the quarter. The other funds with new positions in the stock are Mark Coe’s Intrinsic Edge Capital, Benjamin A. Smith’s Laurion Capital Management, and Alec Litowitz and Ross Laser’s Magnetar Capital.
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as American Tower Corporation (NYSE:AMT) but similarly valued. We will take a look at Lockheed Martin Corporation (NYSE:LMT), Anheuser-Busch InBev SA/NV (NYSE:BUD), PetroChina Company Limited (NYSE:PTR), Starbucks Corporation (NASDAQ:SBUX), Royal Bank of Canada (NYSE:RY), Wells Fargo & Company (NYSE:WFC), and Advanced Micro Devices, Inc. (NASDAQ:AMD). All of these stocks’ market caps are closest to AMT’s market cap.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
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As you can see these stocks had an average of 44.9 hedge funds with bullish positions and the average amount invested in these stocks was $2808 million. That figure was $4611 million in AMT’s case. Wells Fargo & Company (NYSE:WFC) is the most popular stock in this table. On the other hand PetroChina Company Limited (NYSE:PTR) is the least popular one with only 6 bullish hedge fund positions. American Tower Corporation (NYSE:AMT) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for AMT is 69.3. 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 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 31.6% in 2020 through December 2nd and beat the market again by 16 percentage points. Unfortunately AMT wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on AMT were disappointed as the stock returned -5.3% since the end of September (through 12/2) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.
Disclosure: None. This article was originally published at Insider Monkey.