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2019 Review: Top Hedge Fund Stocks vs. Americold Realty Trust (COLD)

Nina Todic

It is already common knowledge that individual investors do not usually have the necessary resources and abilities to properly research an investment opportunity. As a result, most investors pick their illusory “winners” by making a superficial analysis and research that leads to poor performance on aggregate. Since stock returns aren't usually symmetrically distributed and index returns are more affected by a few outlier stocks (i.e. the FAANG stocks dominating and driving S&P 500 Index's returns in recent years), more than 50% of the constituents of the Standard and Poor’s 500 Index underperform the benchmark. Hence, if you randomly pick a stock, there is more than 50% chance that you'd fail to beat the market. At the same time, the 20 most favored S&P 500 stocks by the hedge funds monitored by Insider Monkey generated an outperformance of more than 10 percentage points so far in 2019. Of course, hedge funds do make wrong bets on some occasions and these get disproportionately publicized on financial media, but piggybacking their moves can beat the broader market on average. That's why we are going to go over recent hedge fund activity in Americold Realty Trust (NYSE:COLD).

Americold Realty Trust (NYSE:COLD) has seen a decrease in support from the world's most elite money managers recently. Our calculations also showed that COLD isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video at the end of this article for Q2 rankings).

Hedge funds' reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn't keep up with the unhedged returns of the market indices. 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.

[caption id="attachment_42139" align="aligncenter" width="504"] Ken Heebner of Capital Growth Management[/caption]

We leave no stone unturned when looking for the next great investment idea. For example one of the most bullish analysts in America just put his money where his mouth is. He says, "I'm investing more today than I did back in early 2009." So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. This December, we recommended Adams Energy as a one-way bet based on an under-the-radar fund manager's investor letter and the stock is still extremely cheap despite already gaining 20 percent. Keeping this in mind let's view the recent hedge fund action regarding Americold Realty Trust (NYSE:COLD).

What have hedge funds been doing with Americold Realty Trust (NYSE:COLD)?

At Q3's end, a total of 27 of the hedge funds tracked by Insider Monkey were long this stock, a change of -10% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards COLD over the last 17 quarters. With the smart money's positions undergoing their usual ebb and flow, there exists a few notable hedge fund managers who were increasing their stakes meaningfully (or already accumulated large positions).

When looking at the institutional investors followed by Insider Monkey, D E Shaw, managed by David E. Shaw, holds the largest position in Americold Realty Trust (NYSE:COLD). D E Shaw has a $54.7 million position in the stock, comprising 0.1% of its 13F portfolio. Sitting at the No. 2 spot is Citadel Investment Group, managed by Ken Griffin, which holds a $49 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Remaining hedge funds and institutional investors that are bullish comprise Dan Loeb's Third Point, Israel Englander's Millennium Management and Ken Heebner's Capital Growth Management. In terms of the portfolio weights assigned to each position SkyTop Capital Management allocated the biggest weight to Americold Realty Trust (NYSE:COLD), around 6.1% of its 13F portfolio. Waterfront Capital Partners is also relatively very bullish on the stock, setting aside 5.44 percent of its 13F equity portfolio to COLD.

Due to the fact that Americold Realty Trust (NYSE:COLD) has witnessed a decline in interest from hedge fund managers, it's easy to see that there exists a select few hedgies that slashed their positions entirely last quarter. Intriguingly, Doug Silverman and Alexander Klabin's Senator Investment Group said goodbye to the largest investment of the "upper crust" of funds monitored by Insider Monkey, worth an estimated $113.5 million in stock. Stuart J. Zimmer's fund, Zimmer Partners, also dropped its stock, about $108.8 million worth. These transactions are interesting, as total hedge fund interest fell by 3 funds last quarter.

Let's also examine hedge fund activity in other stocks similar to Americold Realty Trust (NYSE:COLD). These stocks are Woori Financial Group Inc. (NYSE:WF), Pearson PLC (NYSE:PSO), Hill-Rom Holdings, Inc. (NYSE:HRC), and Axalta Coating Systems Ltd (NYSE:AXTA). All of these stocks' market caps resemble COLD's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position WF,2,2420,1 PSO,3,5491,-1 HRC,26,663107,-1 AXTA,56,2298717,15 Average,21.75,742434,3.5 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 21.75 hedge funds with bullish positions and the average amount invested in these stocks was $742 million. That figure was $472 million in COLD's case. Axalta Coating Systems Ltd (NYSE:AXTA) is the most popular stock in this table. On the other hand Woori Financial Group Inc. (NYSE:WF) is the least popular one with only 2 bullish hedge fund positions. Americold Realty Trust (NYSE:COLD) is not the most popular stock in this group but hedge fund interest is still above average. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.1% in 2019 through December 23rd and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. Hedge funds were also right about betting on COLD, though not to the same extent, as the stock returned 36.7% during 2019 (as of 12/23) and outperformed the market as well. Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

5 Most Popular Stocks Among Hedge Funds

Disclosure: None. This article was originally published at Insider Monkey.

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