As we already know from media reports and hedge fund investor letters, hedge funds delivered their best returns in a decade. Most investors who decided to stick with hedge funds after a rough 2018 recouped their losses by the end of the fourth quarter of 2019. A significant number of hedge funds continued their strong performance in 2020 and 2021 as well. We get to see hedge funds’ thoughts towards the market and individual stocks by aggregating their quarterly portfolio movements and reading their investor letters. In this article, we will particularly take a look at what hedge funds think about Artisan Partners Asset Management Inc (NYSE:APAM).
Artisan Partners Asset Management Inc (NYSE:APAM) shares haven’t seen a lot of action during the second quarter. Overall, hedge fund sentiment was unchanged. The stock was in 21 hedge funds’ portfolios at the end of the first quarter of 2021. Our calculations also showed that APAM isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings). At the end of this article we will also compare APAM to other stocks including Community Bank System, Inc. (NYSE:CBU), Parsons Corporation (NYSE:PSN), and Premier Inc (NASDAQ:PINC) to get a better sense of its popularity.
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 115 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. For example, Chuck Schumer recently stated that marijuana legalization will be a Senate priority. So, we are checking out this under the radar stock that will benefit from this. We go through lists like the 10 best battery stocks to pick the next Tesla that will deliver a 10x return. 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 homepage. With all of this in mind we’re going to check out the recent hedge fund action encompassing Artisan Partners Asset Management Inc (NYSE:APAM).
Do Hedge Funds Think APAM Is A Good Stock To Buy Now?
At the end of March, a total of 21 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 0% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in APAM over the last 23 quarters. With hedge funds’ positions undergoing their usual ebb and flow, there exists a few key hedge fund managers who were boosting their holdings significantly (or already accumulated large positions).
More specifically, Fisher Asset Management was the largest shareholder of Artisan Partners Asset Management Inc (NYSE:APAM), with a stake worth $78.1 million reported as of the end of March. Trailing Fisher Asset Management was Renaissance Technologies, which amassed a stake valued at $60.6 million. Royce & Associates, Millennium Management, and Citadel Investment Group 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 Full18 Capital allocated the biggest weight to Artisan Partners Asset Management Inc (NYSE:APAM), around 1.26% of its 13F portfolio. Sprott Asset Management is also relatively very bullish on the stock, setting aside 0.72 percent of its 13F equity portfolio to APAM.
Seeing as Artisan Partners Asset Management Inc (NYSE:APAM) has faced declining sentiment from the entirety of the hedge funds we track, we can see that there was a specific group of fund managers who were dropping their positions entirely in the first quarter. Interestingly, Sander Gerber’s Hudson Bay Capital Management dumped the largest investment of all the hedgies watched by Insider Monkey, totaling about $3.8 million in stock. Dmitry Balyasny’s fund, Balyasny Asset Management, also cut its stock, about $1.1 million worth. These moves are intriguing to say the least, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Artisan Partners Asset Management Inc (NYSE:APAM) but similarly valued. We will take a look at Community Bank System, Inc. (NYSE:CBU), Parsons Corporation (NYSE:PSN), Premier Inc (NASDAQ:PINC), American Well Corporation (NYSE:AMWL), ACADIA Pharmaceuticals Inc. (NASDAQ:ACAD), Avnet, Inc. (NYSE:AVT), and Hutchison China MediTech Limited (NASDAQ:HCM). This group of stocks’ market valuations are closest to APAM’s market valuation.
|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 17.6 hedge funds with bullish positions and the average amount invested in these stocks was $389 million. That figure was $280 million in APAM’s case. ACADIA Pharmaceuticals Inc. (NASDAQ:ACAD) is the most popular stock in this table. On the other hand Community Bank System, Inc. (NYSE:CBU) is the least popular one with only 8 bullish hedge fund positions. Artisan Partners Asset Management Inc (NYSE:APAM) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for APAM is 55.2. 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. 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 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 23.8% in 2021 through July 16th and beat the market again by 7.7 percentage points. Unfortunately APAM wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on APAM were disappointed as the stock returned -3.4% since the end of March (through 7/16) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as many of these stocks already outperformed the market since 2019.
Follow Artisan Partners Asset Management Inc. (NYSE:APAM)
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Disclosure: None. This article was originally published at Insider Monkey.