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Is AptarGroup, Inc. (ATR) Going to Burn These Hedge Funds?

“October lived up to its scary reputation—the S&P 500 falling in the month by the largest amount in the last 40 years, the only worse Octobers being ’08 and the Crash of ’87. For perspective, there have been only 5 occasions in those 40 years when the S&P 500 declined by greater than 20% from peak to trough. Other than the ’87 Crash, all were during recessions. There were 17 other instances, over the same time frame, when the market fell by over 10% but less than 20%. Furthermore, this is the 18th correction of 5% or more since the current bull market started in March ’09. Corrections are the norm. They can be healthy as they often undo market complacency—overbought levels—potentially allowing the market to base and move even higher.” This is how Trapeze Asset Management summarized the recent market moves in its investor letter. We pay attention to what hedge funds are doing in a particular stock before considering a potential investment because it works for us. So let’s take a glance at the smart money sentiment towards one of the stocks hedge funds invest in.

AptarGroup, Inc. (NYSE:ATR) was in 13 hedge funds’ portfolios at the end of September. ATR has seen an increase in support from the world’s most elite money managers of late. There were 11 hedge funds in our database with ATR positions at the end of the previous quarter. Our calculations also showed that ATR isn’t among the 30 most popular stocks among hedge funds.

So, why do we pay attention to hedge fund sentiment before making any investment decisions? Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the market by 18 percentage points since May 2014 through December 3, 2018 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in our short portfolio.

Chuck Royce

Let’s take a look at the new hedge fund action surrounding AptarGroup, Inc. (NYSE:ATR).

What does the smart money think about AptarGroup, Inc. (NYSE:ATR)?

At Q3’s end, a total of 13 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 18% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards ATR over the last 13 quarters. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

No of Hedge Funds With ATR Positions

Among these funds, Royce & Associates held the most valuable stake in AptarGroup, Inc. (NYSE:ATR), which was worth $27.6 million at the end of the third quarter. On the second spot was Renaissance Technologies which amassed $22 million worth of shares. Moreover, Millennium Management, Gotham Asset Management, and Stevens Capital Management were also bullish on AptarGroup, Inc. (NYSE:ATR), allocating a large percentage of their portfolios to this stock.

Consequently, some big names were leading the bulls’ herd. Gotham Asset Management, managed by Joel Greenblatt, established the largest position in AptarGroup, Inc. (NYSE:ATR). Gotham Asset Management had $4.7 million invested in the company at the end of the quarter. Matthew Tewksbury’s Stevens Capital Management also made a $1.5 million investment in the stock during the quarter. The other funds with new positions in the stock are D. E. Shaw’s D E Shaw, Matthew Hulsizer’s PEAK6 Capital Management, and Dmitry Balyasny’s Balyasny Asset Management.

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as AptarGroup, Inc. (NYSE:ATR) but similarly valued. We will take a look at US Foods Holding Corp. (NYSE:USFD), Cullen/Frost Bankers, Inc. (NYSE:CFR), Erie Indemnity Company (NASDAQ:ERIE), and Fair Isaac Corporation (NYSE:FICO). This group of stocks’ market valuations are closest to ATR’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
USFD 36 1176157 -6
CFR 18 169671 -3
ERIE 14 73849 4
FICO 21 344358 -1
Average 22.25 441009 -1.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 22.25 hedge funds with bullish positions and the average amount invested in these stocks was $441 million. That figure was $69 million in ATR’s case. US Foods Holding Corp. (NYSE:USFD) is the most popular stock in this table. On the other hand Erie Indemnity Company (NASDAQ:ERIE) is the least popular one with only 14 bullish hedge fund positions. Compared to these stocks AptarGroup, Inc. (NYSE:ATR) is even less popular than ERIE. Considering that hedge funds aren’t fond of this stock in relation to other companies analyzed in this article, it may be a good idea to analyze it in detail and understand why the smart money isn’t behind this stock. This isn’t necessarily bad news. Although it is possible that hedge funds may think the stock is overpriced and view the stock as a short candidate, they may not be very familiar with the bullish thesis. In either case more research is warranted.

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

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