Investing in small-cap stocks has historically been a way to outperform the market, as small-cap companies typically grow faster on average than the blue chips. That outperformance comes with a price, however, as there are occasional periods of higher volatility. The time period between June 25 and the end of October was one of those periods, as the Russell 2000 ETF (IWM) underperformed the larger S&P 500 ETF (SPY) by more than 14 percentage points. Given that the funds we track tend to have a disproportionate amount of their portfolios invested in smaller-cap stocks, they had some added volatility in their portfolios too. Actually, their moves are potentially one of the factors that contributed to this volatility. In this article, we use our extensive database of hedge fund holdings to find out what the smart money thinks of American Woodmark Corporation (NASDAQ:AMWD).
Is American Woodmark Corporation (NASDAQ:AMWD) a healthy stock for your portfolio? Hedge funds are selling. The number of bullish hedge fund bets dropped by five during the past quarter. At the end of this article, we will also compare American Woodmark Corporation (NASDAQ:AMWD) to other stocks including Sunrun Inc (NASDAQ:RUN), Schweitzer-Mauduit International, Inc. (NYSE:SWM), and AAON, Inc. (NASDAQ:AAON) to get a better sense of its popularity.
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In the financial world there are many formulas stock traders put to use to size up stocks. A couple of the less utilized formulas are hedge fund and insider trading moves. Experts at Insider Monkey, a website specializing in hedge funds, have shown that, historically, those who follow the best picks of the best hedge fund managers can trounce the broader indices by a superb amount (see the details here).
Now, let’s take a look at the recent action encompassing American Woodmark Corporation (NASDAQ:AMWD).
What does the smart money think about American Woodmark Corporation (NASDAQ:AMWD)?
Heading into Q4, a total of 15 of the hedge funds tracked by Insider Monkey held long positions in this stock, a drop of 25% from one quarter earlier. With the smart money’s capital changing hands, there exists an “upper tier” of notable hedge fund managers who were increasing their stakes considerably (or already accumulated large positions).
According to Insider Monkey’s hedge fund database, Jim Simons’ Renaissance Technologies had the number one position in American Woodmark Corporation (NASDAQ:AMWD), worth close to $48.1 million, amounting to 0.1% of its total 13F portfolio. The second-largest stake is held by Gotham Asset Management, led by Joel Greenblatt, holding a $12.1 million position; 0.1% of its 13F portfolio is allocated to the stock. Remaining peers that are bullish contain Cliff Asness’ AQR Capital Management, Chuck Royce’s Royce & Associates, and Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital.
Judging by the fact that American Woodmark Corporation (NASDAQ:AMWD) has experienced declining sentiment from the aggregate hedge fund industry, it’s easy to see that there is a sect of hedgies who were dropping their full holdings in the third quarter. It’s worth mentioning that Israel Englander’s Millennium Management dumped the biggest stake of the “upper crust” of funds watched by Insider Monkey, comprising close to $3.6 million in stock, while Chao Ku of Nine Chapters Capital Management was right behind this move, as the fund said goodbye to about $2.2 million worth of shares. These transactions are important to note, as total hedge fund interest fell by five funds in the third quarter.
Let’s also review hedge fund activity in other stocks similar to American Woodmark Corporation (NASDAQ:AMWD). We will take a look at Sunrun Inc (NASDAQ:RUN), Schweitzer-Mauduit International, Inc. (NYSE:SWM), AAON, Inc. (NASDAQ:AAON), and Navistar International Corp (NYSE:NAV). This group of stocks’ market valuations match American Woodmark Corporation (NASDAQ:AMWD)’s market valuation.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
As you can see these stocks had an average of 15 hedge funds with bullish positions and the average amount invested in these stocks was $208 million, nearly double the $106 million of American Woodmark shares held by hedge funds. Navistar International Corp (NYSE:NAV) is the most popular stock in this table. On the other hand AAON, Inc. (NASDAQ:AAON) is the least popular one with only eight bullish hedge fund positions. American Woodmark Corporation (NASDAQ:AMWD) 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 Navistar might be a better candidate to consider a long position in.