Should I Buy Ameresco Inc (AMRC)?

The Insider Monkey team has completed processing the quarterly 13F filings for the September quarter submitted by the hedge funds and other money managers included in our extensive database. Most hedge fund investors experienced strong gains on the back of a strong market performance, which certainly propelled them to adjust their equity holdings so as to maintain the desired risk profile. As a result, the relevancy of these public filings and their content is indisputable, as they may reveal numerous high-potential stocks. The following article will discuss the smart money sentiment towards Ameresco Inc (NYSE:AMRC).

Should we buy AMRC? Ameresco Inc (NYSE:AMRC) has seen a decrease in enthusiasm from smart money recently. Ameresco Inc (NYSE:AMRC) was in 8 hedge funds’ portfolios at the end of September. The all time high for this statistics is 13. Our calculations also showed that AMRC 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.

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 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.

Richard Driehaus of Driehaus Capital

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. Now let’s go over the fresh hedge fund action regarding Ameresco Inc (NYSE:AMRC).

How are hedge funds trading Ameresco Inc (NYSE:AMRC)?

At Q3’s end, a total of 8 of the hedge funds tracked by Insider Monkey were long this stock, a change of -38% from the second quarter of 2020. On the other hand, there were a total of 7 hedge funds with a bullish position in AMRC a year ago. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Among these funds, Royce & Associates held the most valuable stake in Ameresco Inc (NYSE:AMRC), which was worth $24.2 million at the end of the third quarter. On the second spot was Bandera Partners which amassed $14.3 million worth of shares. Driehaus Capital, Arosa Capital Management, and Old Well Partners 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 Bandera Partners allocated the biggest weight to Ameresco Inc (NYSE:AMRC), around 9.35% of its 13F portfolio. Old Well Partners is also relatively very bullish on the stock, dishing out 1.22 percent of its 13F equity portfolio to AMRC.

Because Ameresco Inc (NYSE:AMRC) has faced falling interest from the aggregate hedge fund industry, it’s safe to say that there is a sect of fund managers that elected to cut their entire stakes in the third quarter. Intriguingly, John Overdeck and David Siegel’s Two Sigma Advisors dumped the biggest stake of the “upper crust” of funds followed by Insider Monkey, valued at an estimated $0.4 million in stock. Ken Griffin’s fund, Citadel Investment Group, also dropped its stock, about $0.3 million worth. These transactions are important to note, as total hedge fund interest was cut by 5 funds in the third quarter.

Let’s also examine hedge fund activity in other stocks similar to Ameresco Inc (NYSE:AMRC). These stocks are Cedar Fair, L.P. (NYSE:FUN), Atlas Air Worldwide Holdings, Inc. (NASDAQ:AAWW), Avanos Medical, Inc. (NYSE:AVNS), PMV Pharmaceuticals, Inc. (NASDAQ:PMVP), Korn Ferry (NYSE:KFY), MakeMyTrip Limited (NASDAQ:MMYT), and Liberty Latin America Ltd. (NASDAQ:LILA). This group of stocks’ market valuations match AMRC’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
FUN 13 112538 -1
AAWW 27 254084 1
AVNS 20 200128 5
PMVP 17 548921 17
KFY 21 156083 -7
MMYT 10 28638 0
LILA 17 84071 2
Average 17.9 197780 2.4

View table here if you experience formatting issues.

As you can see these stocks had an average of 17.9 hedge funds with bullish positions and the average amount invested in these stocks was $198 million. That figure was $57 million in AMRC’s case. Atlas Air Worldwide Holdings, Inc. (NASDAQ:AAWW) is the most popular stock in this table. On the other hand MakeMyTrip Limited (NASDAQ:MMYT) is the least popular one with only 10 bullish hedge fund positions. Compared to these stocks Ameresco Inc (NYSE:AMRC) is even less popular than MMYT. Our overall hedge fund sentiment score for AMRC is 18.5. 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. Hedge funds clearly dropped the ball on AMRC as the stock delivered strong returns, though hedge funds’ consensus picks still generated respectable returns. 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 still beat the market by 16 percentage points. A small number of hedge funds were also right about betting on AMRC as the stock returned 33.1% since Q3 (through December 2nd) and outperformed the market by an even larger margin.

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