Although the masses and most of the financial media blame hedge funds for their exorbitant fee structure and disappointing performance, these investors have proven to have great stock-picking abilities over the years (which is why their assets under management continue to swell). We believe that hedge fund sentiment should be a crucial tool in an individual investor’s stock selection process, as it can offer good insight into what the brightest minds in the financial industry think of certain stocks. After all, these people have access to the smartest analysts and expensive data/information sources that individual investors cannot match. So should you consider investing in Advanced Micro Devices, Inc. (NASDAQ:AMD)? Smart money sentiment may provide an answer to this question.
East Advanced Micro Devices, Inc. (NASDAQ:AMD) a worthwhile investment right now? Smart money was selling. The number of long positions in hedge funds fell by 11 recently. Advanced Micro Devices, Inc. (NASDAQ:AMD) was in 51 hedge fund portfolios at the end of Q2 2020. The all-time high for this statistic is 62. Our calculations also showed that AMD is not among the 30 most popular stocks among hedge funds (click for Q2 rankings and watch the video for a quick overview of the top 5 stocks).
Video: Watch our video on the 5 most popular hedge fund stocks.
For the average investor, there are a number of tools available to stock traders to evaluate their stock investments. Some of the best tools are hedge funds and insider trading signals. Our researchers have shown that, historically, those who follow the top picks of top fund managers can outperform the S&P 500 by a superb amount (see details here).
Arrowstreet Capital’s Peter Rathjens
At Insider Monkey, we scour multiple sources to discover the next big investment idea. Hedge fund sentiment toward Tesla hit an all-time high at the end of 2019, and Tesla shares have more than quadrupled this year. We’re trying to identify other winners of the EV revolution, so we’re checking this out lithium stock under the radar. We go through lists like the 10 most profitable companies around the world to choose the best large-cap stocks to buy. Although we recommend positions in only a tiny fraction of the companies we review, we check as many stocks as possible. We read letters from hedge fund investors and listen to stock presentations at hedge fund conferences. You can subscribe to our free daily newsletter at our website to get excerpts of these letters to your inbox. With that in mind, let’s take a look at the hedge fund’s new action on Advanced Micro Devices, Inc. (NASDAQ:AMD).
Hedge fund activity in Advanced Micro Devices, Inc. (NASDAQ: AMD)
At the end of the second quarter, a total of 51 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -18% from the previous quarter. By comparison, 41 hedge funds held bullish stocks or call options on AMD a year ago. With smart money positions undergoing their usual ebb and flow, there is a select group of notable hedge fund managers who were significantly increasing their holdings (or had already accumulated significant positions).
Specifically, Citadel Investment Group was the largest shareholder in Advanced Micro Devices, Inc. (NASDAQ:AMD), with a stake worth $493.2 million at the end of September. Behind Citadel Investment Group was DE Shaw, which amassed a stake valued at $458.2 million. Fisher Asset Management, Arrowstreet Capital and GQG Partners were also big on the stock, becoming one of the company’s largest hedge fund holders. In terms of portfolio weights assigned to each position Kadensa Capital assigned the largest weight to Advanced Micro Devices, Inc. (NASDAQ: AMD), approximately 16.99% of its 13F portfolio. Management of totemic points is also relatively very bullish on the stock, reserving 5.21% of its 13F stock portfolio for AMD.
Given that Advanced Micro Devices, Inc. (NASDAQ:AMD) has faced declining interest from smart money, it’s easy to see that there is a certain “level” of hedgies that decided to sell all of their holdings in the last quarter. It should be mentioned that Steve Cohen Point72 Asset Management sold the largest “upper crust” investment of funds monitored by Insider Monkey, comprising about $53.8 million in stocks, and Larry Chen and Terry Zhang’s Tairen Capital was right behind the move, as the fund said goodbye to around $50.7 million. These bearish behaviors are important to note, as overall hedge fund interest fell by 11 funds in the last quarter.
Now let’s review hedge fund activity in other stocks – not necessarily in the same industry as Advanced Micro Devices, Inc. (NASDAQ: AMD) but of similar value. We will be looking at Enbridge Inc (NYSE:IN B), The TJX Companies, Inc. (NYSE:TJX), Target Company (NYSE:TGT), General Electric Company (NYSE:GE), NetEase, Inc. (NASDAQ:NTES), Duke Energy Corporation (NYSE:duke) and Activision Blizzard, Inc. (NASDAQ:ATVI). The market capitalization of this group of stocks corresponds to the market capitalization of AMD.
[table] Ticker, Number of HF with positions, Total value of HF positions (x1000), Change of position HF ENB,28,379932,3 TJX,72,2347508,3 TGT,54,3159010,0 GE,57,3186232,-1 NTES,38.4594320,-1 DUK,33.906929,-2 ATVI,97.3564560,-4 Mean,54.1,2591213,-0.3 [/table]
See the table here if you are having formatting issues.
As you can see, these stocks had an average of 54.1 hedge funds with bullish positions and the average amount invested in these stocks was $2,591 million. This figure was $2,569 million in the case of AMD. Activision Blizzard, Inc. (NASDAQ:ATVI) is the most popular action in this table. On the other hand, Enbridge Inc (NYSE:IN B) is the least popular with only 28 bullish hedge fund positions. Advanced Micro Devices, Inc. (NASDAQ:AMD) isn’t the least popular stock in this group, but hedge fund interest is still below average. Our overall hedge fund sentiment score for AMD is 35.3. Stocks with a higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. Our calculations showed that Top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks have gained 30% in 2020 through October 23 and still beat the market by 21 percentage points. A small number of hedge funds were also right to bet on AMD, as the stock returned 55.8% since the end of the second quarter (through 10/23) and outperformed the market by an even bigger margin.
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Disclosure: none. This article was originally published on Insider Monkey.