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 Advanced Micro Devices, Inc. (NASDAQ:AMD).
Is Advanced Micro Devices, Inc. (NASDAQ:AMD) a good stock to buy now? The smart money was in an optimistic mood. The number of bullish hedge fund bets moved up by 20 lately. Advanced Micro Devices, Inc. (NASDAQ:AMD) was in 71 hedge funds' portfolios at the end of the third quarter of 2020. The all time high for this statistics is 62. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. 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 for a quick look at the top 5 stocks). There were 51 hedge funds in our database with AMD positions at the end of the second quarter. Video: Watch our video about the top 5 most popular hedge fund stocks.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 66 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'll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 13% through November 17th. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Gabriel Plotkin of Melvin Capital Management
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, we believe electric vehicles and energy storage are set to become giant markets. Tesla’s stock price skyrocketed, yet lithium prices are still below their 2019 highs. So, we are checking out this lithium stock right now. We go through lists like the 15 best blue chip stocks to buy to pick the best large-cap stocks to buy. 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 website. Now we're going to view the recent hedge fund action regarding Advanced Micro Devices, Inc. (NASDAQ:AMD).
Hedge fund activity in Advanced Micro Devices, Inc. (NASDAQ:AMD)
At the end of the third quarter, a total of 71 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 39% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards AMD over the last 21 quarters. So, let's find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, D E Shaw was the largest shareholder of Advanced Micro Devices, Inc. (NASDAQ:AMD), with a stake worth $1049.9 million reported as of the end of September. Trailing D E Shaw was Citadel Investment Group, which amassed a stake valued at $921.5 million. Fisher Asset Management, GQG Partners, and Viking Global 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 Totem Point Management allocated the biggest weight to Advanced Micro Devices, Inc. (NASDAQ:AMD), around 6.22% of its 13F portfolio. Jericho Capital Asset Management is also relatively very bullish on the stock, earmarking 4.41 percent of its 13F equity portfolio to AMD.
With a general bullishness amongst the heavyweights, specific money managers have been driving this bullishness. Viking Global, managed by Andreas Halvorsen, established the most valuable position in Advanced Micro Devices, Inc. (NASDAQ:AMD). Viking Global had $369 million invested in the company at the end of the quarter. Alex Sacerdote's Whale Rock Capital Management also made a $201.5 million investment in the stock during the quarter. The other funds with brand new AMD positions are Renaissance Technologies, Gabriel Plotkin's Melvin Capital Management, and Daniel Patrick Gibson's Sylebra Capital Management.
Let's check out hedge fund activity in other stocks - not necessarily in the same industry as Advanced Micro Devices, Inc. (NASDAQ:AMD) but similarly valued. These stocks are GlaxoSmithKline plc (NYSE:GSK), Sony Corporation (NYSE:SNE), The Boeing Company (NYSE:BA), ServiceNow Inc (NYSE:NOW), 3M Company (NYSE:MMM), HDFC Bank Limited (NYSE:HDB), and Fidelity National Information Services Inc. (NYSE:FIS). This group of stocks' market valuations resemble AMD's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position GSK,31,1772408,3 SNE,26,369841,-2 BA,43,1702712,4 NOW,82,5945474,-4 MMM,56,1347738,14 HDB,34,1121313,-8 FIS,88,7940617,-23 Average,51.4,2885729,-2.3 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 51.4 hedge funds with bullish positions and the average amount invested in these stocks was $2886 million. That figure was $5089 million in AMD's case. Fidelity National Information Services Inc. (NYSE:FIS) is the most popular stock in this table. On the other hand Sony Corporation (NYSE:SNE) is the least popular one with only 26 bullish hedge fund positions. Advanced Micro Devices, Inc. (NASDAQ:AMD) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for AMD is 76.3. 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 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 30.7% in 2020 through November 27th and beat the market again by 16.1 percentage points. Unfortunately AMD wasn't nearly as popular as these 20 stocks and hedge funds that were betting on AMD were disappointed as the stock returned 6.3% since the end of September (through 11/27) 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.
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Disclosure: None. This article was originally published at Insider Monkey.
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