Was Hedge Funds’ Crystal Ball Right About AMETEK, Inc. (AME)?

The latest 13F reporting period has come and gone, and Insider Monkey have plowed through 821 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds’ and investors’ portfolio positions as of March 31st, a week after the market trough. Now, we are almost done with the second quarter. Investors decided to bet on the economic recovery and a stock market rebound. S&P 500 Index returned almost 20% this quarter. In this article you are going to find out whether hedge funds thoughtAMETEK, Inc. (NYSE:AME) was a good investment heading into the second quarter and how the stock traded in comparison to the top hedge fund picks.

AMETEK, Inc. (NYSE:AME) investors should pay attention to an increase in enthusiasm from smart money lately. AME was in 33 hedge funds’ portfolios at the end of the first quarter of 2020. There were 32 hedge funds in our database with AME holdings at the end of the previous quarter. Our calculations also showed that AME isn’t among the 30 most popular stocks among hedge funds (click for Q1 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.

Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. 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 S&P 500 ETFs by 58 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 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.

At Insider Monkey we scour multiple sources to uncover the next great investment idea. There is a lot of volatility in the markets and this presents amazing investment opportunities from time to time. For example, this trader claims to deliver juiced up returns with one trade a week, so we are checking out his highest conviction idea. A second trader claims to score lucrative profits by utilizing a “weekend trading strategy”, so we look into his strategy’s picks. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We recently recommended several stocks partly inspired by legendary Bill Miller’s investor letter. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 in February after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind let’s take a look at the fresh hedge fund action surrounding AMETEK, Inc. (NYSE:AME).

What have hedge funds been doing with AMETEK, Inc. (NYSE:AME)?

At the end of the first quarter, a total of 33 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 3% from the fourth quarter of 2019. The graph below displays the number of hedge funds with bullish position in AME over the last 18 quarters. With hedgies’ sentiment swirling, there exists a select group of noteworthy hedge fund managers who were adding to their holdings considerably (or already accumulated large positions).

More specifically, Citadel Investment Group was the largest shareholder of AMETEK, Inc. (NYSE:AME), with a stake worth $199.8 million reported as of the end of September. Trailing Citadel Investment Group was GAMCO Investors, which amassed a stake valued at $90.2 million. D E Shaw, Adage Capital Management, and Giverny Capital 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 Giverny Capital allocated the biggest weight to AMETEK, Inc. (NYSE:AME), around 6.67% of its 13F portfolio. Jade Capital Advisors is also relatively very bullish on the stock, setting aside 2.5 percent of its 13F equity portfolio to AME.

Now, specific money managers have jumped into AMETEK, Inc. (NYSE:AME) headfirst. Point72 Asset Management, managed by Steve Cohen, initiated the most outsized position in AMETEK, Inc. (NYSE:AME). Point72 Asset Management had $25.3 million invested in the company at the end of the quarter. Robert Vincent McHugh’s Jade Capital Advisors also initiated a $2 million position during the quarter. The other funds with new positions in the stock are Philip Hempleman’s Ardsley Partners, Paul Tudor Jones’s Tudor Investment Corp, and John Overdeck and David Siegel’s Two Sigma Advisors.

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as AMETEK, Inc. (NYSE:AME) but similarly valued. These stocks are Royal Bank of Scotland Group plc (NYSE:RBS), Palo Alto Networks Inc (NYSE:PANW), Rogers Communications Inc. (NYSE:RCI), and Microchip Technology Incorporated (NASDAQ:MCHP). This group of stocks’ market caps match AME’s market cap.

View table here if you experience formatting issues.

As you can see these stocks had an average of 26.5 hedge funds with bullish positions and the average amount invested in these stocks was $931 million. That figure was $640 million in AME’s case. Palo Alto Networks Inc (NYSE:PANW) is the most popular stock in this table. On the other hand Royal Bank of Scotland Group plc (NYSE:RBS) is the least popular one with only 5 bullish hedge fund positions. AMETEK, Inc. (NYSE:AME) is not the most popular stock in this group but hedge fund interest is still above average. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 12.3% in 2020 through June 30th but still beat the market by 15.5 percentage points. Hedge funds were also right about betting on AME, though not to the same extent, as the stock returned 24.3% during the second quarter and outperformed the market as well.

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