Coronavirus is probably the #1 concern in investors’ minds right now. It should be. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW. We predicted that a US recession is imminent and US stocks will go down by at least 20% in the next 3-6 months. We also told you to short the market ETFs and buy long-term bonds. Investors who agreed with us and replicated these trades are up double digits whereas the market is down double digits. Our article also called for a total international travel ban to prevent the spread of the coronavirus especially from Europe. We were one step ahead of the markets and the president (see why hell is coming).
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. We know that hedge funds generate strong, risk-adjusted returns over the long run, therefore imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, smart money investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn’t mean that they don’t have occasional colossal losses; they do (like Peltz’s recent General Electric losses). However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, as the current round of 13F filings has just ended, let’s examine the smart money sentiment towards American Woodmark Corporation (NASDAQ:AMWD).
American Woodmark Corporation (NASDAQ:AMWD) investors should be aware of an increase in support from the world’s most elite money managers lately. Our calculations also showed that AMWD isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of this article for Q3 rankings).
According to most stock holders, hedge funds are viewed as unimportant, outdated investment tools of years past. While there are over 8000 funds trading today, We choose to focus on the bigwigs of this club, about 850 funds. These investment experts command bulk of the smart money’s total capital, and by observing their matchless picks, Insider Monkey has brought to light many investment strategies that have historically outstripped the broader indices. Insider Monkey’s flagship short hedge fund strategy outrun the S&P 500 short ETFs by around 20 percentage points per annum since its inception in March 2017. Our portfolio of short stocks lost 35.3% since February 2017 (through March 3rd) even though the market was up more than 35% during the same period. We just shared a list of 7 short targets in our latest quarterly update .
We leave no stone unturned when looking for the next great investment idea. For example, Federal Reserve and other Central Banks are tripping over each other to print more money. As a result, we believe gold stocks will outperform fixed income ETFs in the long-term. So we are checking out investment opportunities like this one. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences (by the way watch this video if you want to hear one of the best healthcare hedge fund manager’s coronavirus analysis). Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind let’s review the recent hedge fund action encompassing American Woodmark Corporation (NASDAQ:AMWD).
How are hedge funds trading American Woodmark Corporation (NASDAQ:AMWD)?
Heading into the first quarter of 2020, a total of 17 of the hedge funds tracked by Insider Monkey were long this stock, a change of 13% from the third quarter of 2019. The graph below displays the number of hedge funds with bullish position in AMWD over the last 18 quarters. With the smart money’s positions undergoing their usual ebb and flow, there exists an “upper tier” of noteworthy hedge fund managers who were boosting their stakes meaningfully (or already accumulated large positions).
The largest stake in American Woodmark Corporation (NASDAQ:AMWD) was held by Renaissance Technologies, which reported holding $10.8 million worth of stock at the end of September. It was followed by Royce & Associates with a $9.9 million position. Other investors bullish on the company included Arrowstreet Capital, Driehaus Capital, and Winton Capital Management. In terms of the portfolio weights assigned to each position LFL Advisers allocated the biggest weight to American Woodmark Corporation (NASDAQ:AMWD), around 1.88% of its 13F portfolio. Driehaus Capital is also relatively very bullish on the stock, designating 0.17 percent of its 13F equity portfolio to AMWD.
As industrywide interest jumped, some big names have been driving this bullishness. Driehaus Capital, managed by Richard Driehaus, initiated the biggest position in American Woodmark Corporation (NASDAQ:AMWD). Driehaus Capital had $6.3 million invested in the company at the end of the quarter. David Harding’s Winton Capital Management also made a $5.3 million investment in the stock during the quarter. The other funds with new positions in the stock are Donald Sussman’s Paloma Partners, Michael Gelband’s ExodusPoint Capital, and Matthew Hulsizer’s PEAK6 Capital Management.
Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as American Woodmark Corporation (NASDAQ:AMWD) but similarly valued. We will take a look at BrightView Holdings, Inc. (NYSE:BV), Tellurian Inc. (NASDAQ:TELL), Kaiser Aluminum Corp. (NASDAQ:KALU), and Easterly Government Properties Inc (NYSE:DEA). This group of stocks’ market values are similar to AMWD’s market value.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
View table here if you experience formatting issues.
As you can see these stocks had an average of 11.75 hedge funds with bullish positions and the average amount invested in these stocks was $132 million. That figure was $51 million in AMWD’s case. Kaiser Aluminum Corp. (NASDAQ:KALU) is the most popular stock in this table. On the other hand BrightView Holdings, Inc. (NYSE:BV) is the least popular one with only 9 bullish hedge fund positions. American Woodmark Corporation (NASDAQ:AMWD) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. 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 10.1 percentage points. These stocks lost 13.0% in 2020 through April 6th but beat the market by 4.2 percentage points. Unfortunately AMWD wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on AMWD were disappointed as the stock returned -56% during the same time period and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.