Hedge funds and large money managers usually invest with a focus on the long-term horizon and, therefore, short-lived dips or bumps on the charts usually don’t make them change their opinion towards a company. This time it may be different. The coronavirus pandemic destroyed the high correlations among major industries and asset classes. We are now in a stock pickers market where fundamentals of a stock have more effect on the price than the overall direction of the market. As a result we observe sudden and large changes in hedge fund positions depending on the news flow. Let’s take a look at the hedge fund sentiment towards Applied Materials, Inc. (NASDAQ:AMAT) to find out whether there were any major changes in hedge funds’ views.
Is Applied Materials, Inc. (NASDAQ:AMAT) a buy here? Investors who are in the know were in a bearish mood. The number of long hedge fund bets went down by 5 lately. Applied Materials, Inc. (NASDAQ:AMAT) was in 68 hedge funds’ portfolios at the end of September. The all time high for this statistic is 78. Our calculations also showed that AMAT isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings).
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium prices have more than doubled over the past year, so we go through lists like the 10 best EV 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. With all of this in mind we’re going to go over the new hedge fund action regarding Applied Materials, Inc. (NASDAQ:AMAT).
Do Hedge Funds Think AMAT Is A Good Stock To Buy Now?
Heading into the fourth quarter of 2021, a total of 68 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -7% from the previous quarter. By comparison, 59 hedge funds held shares or bullish call options in AMAT a year ago. With hedge funds’ capital changing hands, there exists an “upper tier” of notable hedge fund managers who were boosting their holdings substantially (or already accumulated large positions).
More specifically, Generation Investment Management was the largest shareholder of Applied Materials, Inc. (NASDAQ:AMAT), with a stake worth $563 million reported as of the end of September. Trailing Generation Investment Management was Cantillon Capital Management, which amassed a stake valued at $472.3 million. Fisher Asset Management, Matrix Capital Management, and Citadel Investment Group were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Glaxis Capital Management allocated the biggest weight to Applied Materials, Inc. (NASDAQ:AMAT), around 22.69% of its 13F portfolio. Noked Capital is also relatively very bullish on the stock, earmarking 10.7 percent of its 13F equity portfolio to AMAT.
Due to the fact that Applied Materials, Inc. (NASDAQ:AMAT) has experienced bearish sentiment from the smart money, logic holds that there was a specific group of hedge funds who were dropping their entire stakes heading into Q4. Intriguingly, Zach Schreiber’s Point State Capital sold off the largest position of the “upper crust” of funds monitored by Insider Monkey, worth an estimated $120.2 million in stock, and James Crichton’s Hitchwood Capital Management was right behind this move, as the fund sold off about $64.1 million worth. These transactions are interesting, as total hedge fund interest was cut by 5 funds heading into Q4.
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Applied Materials, Inc. (NASDAQ:AMAT) but similarly valued. These stocks are Pinduoduo Inc. (NASDAQ:PDD), General Electric Company (NYSE:GE), Diageo plc (NYSE:DEO), JD.Com Inc (NASDAQ:JD), CVS Health Corporation (NYSE:CVS), Target Corporation (NYSE:TGT), and Anheuser-Busch InBev SA/NV (NYSE:BUD). This group of stocks’ market valuations are similar to AMAT’s market valuation.
|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 43.9 hedge funds with bullish positions and the average amount invested in these stocks was $3683 million. That figure was $4320 million in AMAT’s case. JD.Com Inc (NASDAQ:JD) is the most popular stock in this table. On the other hand Anheuser-Busch InBev SA/NV (NYSE:BUD) is the least popular one with only 11 bullish hedge fund positions. Compared to these stocks Applied Materials, Inc. (NASDAQ:AMAT) is more popular among hedge funds. Our overall hedge fund sentiment score for AMAT is 76.2. 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 returned 28.6% in 2021 through November 30th but still managed to beat the market by 5.6 percentage points. Hedge funds were also right about betting on AMAT as the stock returned 14.5% since the end of September (through 11/30) and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.
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Disclosure: None. This article was originally published at Insider Monkey.