Is Advanced Micro Devices, Inc. (NASDAQ:AMD) a good equity to bet on right now? We like to check what the smart money thinks first before doing extensive research on a given stock. Although there have been several high profile failed hedge fund picks, the consensus picks among hedge fund investors have historically outperformed the market after adjusting for known risk attributes. It's not surprising given that hedge funds have access to better information and more resources to predict the winners in the stock market.
Advanced Micro Devices, Inc. (NASDAQ:AMD) investors should pay attention to an increase in hedge fund sentiment recently. AMD was in 56 hedge funds' portfolios at the end of September. There were 41 hedge funds in our database with AMD positions at the end of the previous quarter. Our calculations also showed that AMD isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings). Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? 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 Russell 2000 ETFs by 40 percentage points since May 2014 (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. Even if you aren't comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.
[caption id="attachment_26029" align="aligncenter" width="482"] Steve Cohen of Point72 Asset Management[/caption]
Unlike the largest US hedge funds that are convinced Dow will soar past 40,000 or the world's most bearish hedge fund that's more convinced than ever that a crash is coming, our long-short investment strategy doesn't rely on bull or bear markets to deliver double digit returns. We only rely on the best performing hedge funds' buy/sell signals. Let's take a look at the latest hedge fund action encompassing Advanced Micro Devices, Inc. (NASDAQ:AMD).
What have hedge funds been doing with Advanced Micro Devices, Inc. (NASDAQ:AMD)?
At Q3's end, a total of 56 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 37% from the second quarter of 2019. On the other hand, there were a total of 28 hedge funds with a bullish position in AMD a year ago. So, let's review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Point72 Asset Management was the largest shareholder of Advanced Micro Devices, Inc. (NASDAQ:AMD), with a stake worth $230.2 million reported as of the end of September. Trailing Point72 Asset Management was Citadel Investment Group, which amassed a stake valued at $134 million. Polar Capital, Jericho Capital Asset Management, and Alyeska 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 Cavalry Asset Management allocated the biggest weight to Advanced Micro Devices, Inc. (NASDAQ:AMD), around 8.91% of its portfolio. Totem Point Management is also relatively very bullish on the stock, designating 6.79 percent of its 13F equity portfolio to AMD.
As aggregate interest increased, key money managers were breaking ground themselves. Jericho Capital Asset Management, managed by Josh Resnick, initiated the largest position in Advanced Micro Devices, Inc. (NASDAQ:AMD). Jericho Capital Asset Management had $71.7 million invested in the company at the end of the quarter. Anand Parekh's Alyeska Investment Group also made a $52.7 million investment in the stock during the quarter. The other funds with new positions in the stock are Kevin Cottrell and Chris LaSusa's KCL Capital, Brandon Haley's Holocene Advisors, and Matthew Knauer and Mina Faltas's Nokota Management.
Let's check out hedge fund activity in other stocks similar to Advanced Micro Devices, Inc. (NASDAQ:AMD). We will take a look at Twitter Inc (NYSE:TWTR), Barclays PLC (NYSE:BCS), Canadian Natural Resources Limited (NYSE:CNQ), and Monster Beverage Corp (NASDAQ:MNST). All of these stocks' market caps match AMD's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position TWTR,50,2252822,3 BCS,15,131768,3 CNQ,32,558227,8 MNST,34,2641322,-4 Average,32.75,1396035,2.5 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 32.75 hedge funds with bullish positions and the average amount invested in these stocks was $1396 million. That figure was $1135 million in AMD's case. Twitter Inc (NYSE:TWTR) is the most popular stock in this table. On the other hand Barclays PLC (NYSE:BCS) is the least popular one with only 15 bullish hedge fund positions. Compared to these stocks Advanced Micro Devices, Inc. (NASDAQ:AMD) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Hedge funds were also right about betting on AMD as the stock returned 35% during the first two months of Q4 and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.
Disclosure: None. This article was originally published at Insider Monkey.
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