Coronavirus is probably the #1 concern in investors' minds right now. It should be. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW. We predicted that a US recession is imminent and US stocks will go down by at least 20% in the next 3-6 months. We also told you to short the market ETFs and buy long-term bonds. Investors who agreed with us and replicated these trades are up double digits whereas the market is down double digits. Our article also called for a total international travel ban to prevent the spread of the coronavirus especially from Europe. We were one step ahead of the markets and the president (see why hell is coming).
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. The Insider Monkey team has completed processing the quarterly 13F filings for the December quarter submitted by the hedge funds and other money managers included in our extensive database. Most hedge fund investors experienced strong gains on the back of a strong market performance, which certainly propelled them to adjust their equity holdings so as to maintain the desired risk profile. As a result, the relevancy of these public filings and their content is indisputable, as they may reveal numerous high-potential stocks. The following article will discuss the smart money sentiment towards ABM Industries, Inc. (NYSE:ABM).
Is ABM Industries, Inc. (NYSE:ABM) a bargain? Prominent investors are becoming less confident. The number of long hedge fund positions were cut by 2 recently. Our calculations also showed that ABM isn't among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of this article for Q3 rankings). ABM was in 12 hedge funds' portfolios at the end of December. There were 14 hedge funds in our database with ABM positions at the end of the previous quarter.
In today’s marketplace there are tons of indicators stock market investors have at their disposal to evaluate stocks. A couple of the less utilized indicators are hedge fund and insider trading signals. Our researchers have shown that, historically, those who follow the best picks of the top investment managers can outpace their index-focused peers by a solid margin (see the details here).
[caption id="attachment_193003" align="aligncenter" width="400"] Chuck Royce of Royce & Associates[/caption]
We leave no stone unturned when looking for the next great investment idea. For example we recently identified a stock that trades 25% below the net cash on its balance sheet. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences, and go through short-term trade recommendations like this one. We even check out the recommendations of services with hard to believe track records. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic's significance before most investors. Keeping this in mind we're going to take a glance at the new hedge fund action surrounding ABM Industries, Inc. (NYSE:ABM).
How are hedge funds trading ABM Industries, Inc. (NYSE:ABM)?
At Q4's end, a total of 12 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -14% from the third quarter of 2019. The graph below displays the number of hedge funds with bullish position in ABM over the last 18 quarters. So, let's review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in ABM Industries, Inc. (NYSE:ABM) was held by Arrowstreet Capital, which reported holding $16.7 million worth of stock at the end of September. It was followed by Royce & Associates with a $13.1 million position. Other investors bullish on the company included GLG Partners, Marshall Wace LLP, and Renaissance Technologies. In terms of the portfolio weights assigned to each position Sciencast Management allocated the biggest weight to ABM Industries, Inc. (NYSE:ABM), around 0.22% of its 13F portfolio. Royce & Associates is also relatively very bullish on the stock, setting aside 0.12 percent of its 13F equity portfolio to ABM.
Seeing as ABM Industries, Inc. (NYSE:ABM) has experienced bearish sentiment from hedge fund managers, logic holds that there lies a certain "tier" of money managers who were dropping their full holdings by the end of the third quarter. Interestingly, Israel Englander's Millennium Management sold off the biggest position of the 750 funds followed by Insider Monkey, valued at close to $1.5 million in stock, and Michael Gelband's ExodusPoint Capital was right behind this move, as the fund dropped about $0.8 million worth. These moves are intriguing to say the least, as aggregate hedge fund interest dropped by 2 funds by the end of the third quarter.
Let's check out hedge fund activity in other stocks - not necessarily in the same industry as ABM Industries, Inc. (NYSE:ABM) but similarly valued. These stocks are National General Holdings Corp (NASDAQ:NGHC), Belden Inc. (NYSE:BDC), Scientific Games Corp (NASDAQ:SGMS), and Avon Products, Inc. (NYSE:AVP). This group of stocks' market values are similar to ABM's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position NGHC,16,238246,-1 BDC,12,64705,-1 SGMS,33,725702,5 AVP,13,307162,-8 Average,18.5,333954,-1.25 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 18.5 hedge funds with bullish positions and the average amount invested in these stocks was $334 million. That figure was $62 million in ABM's case. Scientific Games Corp (NASDAQ:SGMS) is the most popular stock in this table. On the other hand Belden Inc. (NYSE:BDC) is the least popular one with only 12 bullish hedge fund positions. Compared to these stocks ABM Industries, Inc. (NYSE:ABM) is even less popular than BDC. Hedge funds dodged a bullet by taking a bearish stance towards ABM. Our calculations showed that the top 20 most popular hedge fund stocks returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks lost 17.4% in 2020 through March 25th but managed to beat the market by 5.5 percentage points. Unfortunately ABM wasn't nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); ABM investors were disappointed as the stock returned -44.3% during the same time period 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 most of these stocks already outperformed the market so far in Q1. Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.