Dear Valued Visitor,

We have noticed that you are using an ad blocker software.

Although advertisements on the web pages may degrade your experience, our business certainly depends on them and we can only keep providing you high-quality research based articles as long as we can display ads on our pages.

To view this article, you can disable your ad blocker and refresh this page or simply login.

We only allow registered users to use ad blockers. You can sign up for free by clicking here or you can login if you are already a member.

Were Hedge Funds Right About Dumping Archer Daniels Midland Company (ADM)?

IArcher Daniels Midland Company (NYSE:ADM) has experienced a decrease in hedge fund sentiment in recent months. ADM was in 29 hedge funds’ portfolios at the end of the fourth quarter of 2018. There were 32 hedge funds in our database with ADM positions at the end of the previous quarter. Our calculations also showed that ADM isn’t among the 30 most popular stocks among hedge funds.

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that hedge funds’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the market by 32 percentage points since May 2014 through March 12, 2019 (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 27.5% through March 12, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Tom Gayner

We’re going to view the fresh hedge fund action encompassing Archer Daniels Midland Company (NYSE:ADM).

Hedge fund activity in Archer Daniels Midland Company (NYSE:ADM)

At Q4’s end, a total of 29 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -9% from the previous quarter. By comparison, 24 hedge funds held shares or bullish call options in ADM a year ago. With hedgies’ capital changing hands, there exists an “upper tier” of noteworthy hedge fund managers who were increasing their holdings substantially (or already accumulated large positions).

ADM_mar2019

Among these funds, AQR Capital Management held the most valuable stake in Archer Daniels Midland Company (NYSE:ADM), which was worth $133.6 million at the end of the third quarter. On the second spot was Millennium Management which amassed $105.1 million worth of shares. Moreover, Markel Gayner Asset Management, Renaissance Technologies, and Two Sigma Advisors were also bullish on Archer Daniels Midland Company (NYSE:ADM), allocating a large percentage of their portfolios to this stock.

Seeing as Archer Daniels Midland Company (NYSE:ADM) has faced bearish sentiment from the smart money, we can see that there is a sect of fund managers that slashed their entire stakes in the third quarter. It’s worth mentioning that Dmitry Balyasny’s Balyasny Asset Management cut the largest position of all the hedgies followed by Insider Monkey, totaling about $20.4 million in stock, and Steve Cohen’s Point72 Asset Management was right behind this move, as the fund said goodbye to about $18 million worth. These transactions are intriguing to say the least, as total hedge fund interest fell by 3 funds in the third quarter.

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Archer Daniels Midland Company (NYSE:ADM) but similarly valued. We will take a look at Hormel Foods Corporation (NYSE:HRL), United Continental Holdings Inc (NASDAQ:UAL), SunTrust Banks, Inc. (NYSE:STI), and Brown-Forman Corporation (NYSE:BF). This group of stocks’ market caps match ADM’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
HRL 18 125830 6
UAL 49 6715957 6
STI 34 620370 12
BF 21 621082 -1
Average 30.5 2020810 5.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 30.5 hedge funds with bullish positions and the average amount invested in these stocks was $2021 million. That figure was $605 million in ADM’s case. United Continental Holdings Inc (NASDAQ:UAL) is the most popular stock in this table. On the other hand Hormel Foods Corporation (NYSE:HRL) is the least popular one with only 18 bullish hedge fund positions. Archer Daniels Midland Company (NYSE:ADM) 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. Our calculations showed that top 15 most popular stocks among hedge funds returned 19.7% through March 15th and outperformed the S&P 500 ETF (SPY) by 6.6 percentage points. Unfortunately ADM wasn’t in this group. Hedge funds that bet on ADM were disappointed as the stock returned 6.3% and underperformed the market. If you are interested in investing in large cap stocks, you should check out the top 15 hedge fund stocks as 13 of these outperformed the market.

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

DOWNLOAD FREE REPORT: Warren Buffett's Best Stock Picks

Let Warren Buffett, George Soros, Steve Cohen, and Daniel Loeb WORK FOR YOU.

If you want to beat the low cost index funds by 19 percentage points per year, look no further than our monthly newsletter.In this free report you can find an in-depth analysis of the performance of Warren Buffett's entire historical stock picks. We uncovered Warren Buffett's Best Stock Picks and a way to for Buffett to improve his returns by more than 4 percentage points per year.

Bonus Biotech Stock Pick: You can also find a detailed bonus biotech stock pick that we expect to return more than 50% within 12 months.
Subscribe me to Insider Monkey's Free Daily Newsletter
This is a FREE report from Insider Monkey. Credit Card is NOT required.
Loading...