Were Hedge Funds Right About Souring On AMC Networks Inc (AMCX)?

Amid an overall bull market, many stocks that smart money investors were collectively bullish on surged through October 17th. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained 45% and 39% respectively. Our research shows that most of the stocks that smart money likes historically generate strong risk-adjusted returns. That’s why we weren’t surprised when hedge funds’ top 20 large-cap stock picks generated a return of 24.4% during the first 9 months of 2019 and outperformed the broader market benchmark by 4 percentage points.This is why following the smart money sentiment is a useful tool at identifying the next stock to invest in.

AMC Networks Inc (NASDAQ:AMCX) was in 19 hedge funds’ portfolios at the end of June. AMCX investors should be aware of a decrease in support from the world’s most elite money managers lately. There were 20 hedge funds in our database with AMCX holdings at the end of the previous quarter. Our calculations also showed that AMCX isn’t among the 30 most popular stocks among hedge funds (see the video below).
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

To most market participants, hedge funds are viewed as worthless, outdated investment vehicles of years past. While there are over 8000 funds with their doors open at present, Our researchers hone in on the aristocrats of this club, about 750 funds. These money managers oversee bulk of the smart money’s total capital, and by watching their highest performing picks, Insider Monkey has determined a few investment strategies that have historically outperformed the broader indices. Insider Monkey’s flagship hedge fund strategy outrun the S&P 500 index by around 5 percentage points per annum since its inception in May 2014. We were able to generate large returns even by identifying short candidates. Our portfolio of short stocks lost 25.7% since February 2017 (through September 30th) even though the market was up more than 33% during the same period. We just shared a list of 10 short targets in our latest quarterly update .


Unlike former hedge manager, Dr. Steve Sjuggerud, who is convinced Dow will soar past 40000, our long-short investment strategy doesn’t rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. We’re going to analyze the new hedge fund action surrounding AMC Networks Inc (NASDAQ:AMCX).

Hedge fund activity in AMC Networks Inc (NASDAQ:AMCX)

At Q2’s end, a total of 19 of the hedge funds tracked by Insider Monkey were long this stock, a change of -5% from one quarter earlier. By comparison, 19 hedge funds held shares or bullish call options in AMCX a year ago. With hedge funds’ sentiment swirling, there exists a few key hedge fund managers who were upping their stakes meaningfully (or already accumulated large positions).

No of Hedge Funds with AMCX Positions

Among these funds, AQR Capital Management held the most valuable stake in AMC Networks Inc (NASDAQ:AMCX), which was worth $138.7 million at the end of the second quarter. On the second spot was GAMCO Investors which amassed $47.4 million worth of shares. Moreover, Omega Advisors, Horizon Asset Management, and GLG Partners were also bullish on AMC Networks Inc (NASDAQ:AMCX), allocating a large percentage of their portfolios to this stock.

Seeing as AMC Networks Inc (NASDAQ:AMCX) has faced a decline in interest from the aggregate hedge fund industry, it’s easy to see that there lies a certain “tier” of fund managers who sold off their entire stakes by the end of the second quarter. Intriguingly, Jeffrey Talpins’s Element Capital Management dropped the largest stake of the 750 funds tracked by Insider Monkey, valued at about $1.7 million in stock. Ray Dalio’s fund, Bridgewater Associates, also said goodbye to its stock, about $1.5 million worth. These moves are intriguing to say the least, as total hedge fund interest dropped by 1 funds by the end of the second quarter.

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as AMC Networks Inc (NASDAQ:AMCX) but similarly valued. We will take a look at Watts Water Technologies Inc (NYSE:WTS), ASGN Incorporated (NYSE:ASGN), Sanderson Farms, Inc. (NASDAQ:SAFM), and SkyWest, Inc. (NASDAQ:SKYW). This group of stocks’ market caps resemble AMCX’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
WTS 15 336617 0
ASGN 21 207387 -2
SAFM 20 449367 -1
SKYW 13 197438 0
Average 17.25 297702 -0.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 17.25 hedge funds with bullish positions and the average amount invested in these stocks was $298 million. That figure was $307 million in AMCX’s case. ASGN Incorporated (NYSE:ASGN) is the most popular stock in this table. On the other hand SkyWest, Inc. (NASDAQ:SKYW) is the least popular one with only 13 bullish hedge fund positions. AMC Networks Inc (NASDAQ:AMCX) 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 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Unfortunately AMCX wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on AMCX were disappointed as the stock returned -9.8% during the third quarter 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.

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