We know that hedge funds generate strong, risk-adjusted returns over the long run, which is why imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, professional 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. However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, let’s examine the smart money sentiment towards AECOM (NYSE:ACM) and determine whether hedge funds skillfully traded this stock.
Is AECOM (NYSE:ACM) the right pick for your portfolio? Money managers were betting on the stock. The number of bullish hedge fund positions went up by 3 in recent months. Our calculations also showed that ACM isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks).
Video: Watch our video about the top 5 most popular hedge fund stocks.
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey's monthly stock picks returned 101% since March 2017 and outperformed the S&P 500 ETFs by more than 58 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That's why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
At Insider Monkey we scour multiple sources to uncover the next great investment idea. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Hedge fund sentiment towards Tesla reached its all time high at the end of 2019 and Tesla shares more than tripled this year. We are trying to identify other EV revolution winners, so we are checking out this tiny lithium stock. With all of this in mind we're going to take a look at the latest hedge fund action surrounding AECOM (NYSE:ACM).
What have hedge funds been doing with AECOM (NYSE:ACM)?
At Q1's end, a total of 39 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 8% from the fourth quarter of 2019. By comparison, 21 hedge funds held shares or bullish call options in ACM a year ago. 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, Starboard Value LP was the largest shareholder of AECOM (NYSE:ACM), with a stake worth $178.4 million reported as of the end of September. Trailing Starboard Value LP was Renaissance Technologies, which amassed a stake valued at $134.4 million. Citadel Investment Group, Pzena Investment Management, and TIG Advisors 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 Starboard Value LP allocated the biggest weight to AECOM (NYSE:ACM), around 7.23% of its 13F portfolio. Engine Capital is also relatively very bullish on the stock, dishing out 7.15 percent of its 13F equity portfolio to ACM.
With a general bullishness amongst the heavyweights, key hedge funds have jumped into AECOM (NYSE:ACM) headfirst. TIG Advisors, managed by Carl Tiedemann and Michael Tiedemann, created the most outsized position in AECOM (NYSE:ACM). TIG Advisors had $25.6 million invested in the company at the end of the quarter. Brandon Haley's Holocene Advisors also initiated a $11.9 million position during the quarter. The other funds with new positions in the stock are Zilvinas Mecelis's Covalis Capital, Asad Rahman and Aman Kapadia's Akaris Global Partners, and Andrew Byington's Appian Way Asset Management.
Let's go over hedge fund activity in other stocks - not necessarily in the same industry as AECOM (NYSE:ACM) but similarly valued. These stocks are Paylocity Holding Corp (NASDAQ:PCTY), GFL Environmental Inc. (NYSE:GFL), Five9 Inc (NASDAQ:FIVN), and Columbia Sportswear Company (NASDAQ:COLM). This group of stocks' market caps match ACM's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position PCTY,33,409592,7 GFL,10,150736,10 FIVN,33,715609,-2 COLM,15,51797,-8 Average,22.75,331934,1.75 [/table]
As you can see these stocks had an average of 22.75 hedge funds with bullish positions and the average amount invested in these stocks was $332 million. That figure was $671 million in ACM's case. Paylocity Holding Corp (NASDAQ:PCTY) is the most popular stock in this table. On the other hand GFL Environmental Inc. (NYSE:GFL) is the least popular one with only 10 bullish hedge fund positions. Compared to these stocks AECOM (NYSE:ACM) is more popular among hedge funds. 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 returned 12.3% in 2020 through June 30th but still managed to beat the market by 15.5 percentage points. Hedge funds were also right about betting on ACM as the stock returned 25.9% in Q2 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.
