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As we already know from media reports and hedge fund investor letters, hedge funds delivered their best returns in a decade. Most investors who decided to stick with hedge funds after a rough 2018 recouped their losses by the end of the fourth quarter of 2019. A significant number of hedge funds continued their strong performance in 2020 and 2021 as well. We get to see hedge funds' thoughts towards the market and individual stocks by aggregating their quarterly portfolio movements and reading their investor letters. In this article, we will particularly take a look at what hedge funds think about Advantage Solutions Inc. (NASDAQ:ADV).
Is ADV a good stock to buy? The best stock pickers were taking an optimistic view. The number of long hedge fund positions moved up by 5 lately. Advantage Solutions Inc. (NASDAQ:ADV) was in 24 hedge funds' portfolios at the end of the first quarter of 2021. The all time high for this statistic was 19. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that ADV isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings). There were 19 hedge funds in our database with ADV positions at the end of the fourth quarter.
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. Hedge funds have more than $3.5 trillion in assets under management, so you can't expect their entire portfolios to beat the market by large margins. Our research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 115 percentage points since March 2017 (see the details here). So you can still find a lot of gems by following hedge funds' moves today.
Seth Klarman of Baupost Group
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, Chuck Schumer recently stated that marijuana legalization will be a Senate priority. So, we are checking out this under the radar stock that will benefit from this. We go through lists like the 10 best battery stocks to pick the next Tesla that will deliver a 10x return. 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 homepage. Keeping this in mind we're going to take a peek at the recent hedge fund action encompassing Advantage Solutions Inc. (NASDAQ:ADV).
Do Hedge Funds Think ADV Is A Good Stock To Buy Now?
Heading into the second quarter of 2021, a total of 24 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 26% from the previous quarter. The graph below displays the number of hedge funds with bullish position in ADV over the last 23 quarters. With the smart money's positions undergoing their usual ebb and flow, there exists an "upper tier" of key hedge fund managers who were increasing their holdings substantially (or already accumulated large positions).
The largest stake in Advantage Solutions Inc. (NASDAQ:ADV) was held by Leonard Green & Partners, which reported holding $182.5 million worth of stock at the end of December. It was followed by Baupost Group with a $143.6 million position. Other investors bullish on the company included Alyeska Investment Group, Prentice Capital Management, and Woodson Capital Management. In terms of the portfolio weights assigned to each position Prentice Capital Management allocated the biggest weight to Advantage Solutions Inc. (NASDAQ:ADV), around 14.17% of its 13F portfolio. Woodson Capital Management is also relatively very bullish on the stock, earmarking 2.56 percent of its 13F equity portfolio to ADV.
As aggregate interest increased, specific money managers were leading the bulls' herd. Rubric Capital Management, managed by David Rosen, established the largest position in Advantage Solutions Inc. (NASDAQ:ADV). Rubric Capital Management had $19.9 million invested in the company at the end of the quarter. Steven Boyd's Armistice Capital also initiated a $10.6 million position during the quarter. The other funds with brand new ADV positions are Greg Eisner's Engineers Gate Manager, Ken Griffin's Citadel Investment Group, and Donald Sussman's Paloma Partners.
Let's now take a look at hedge fund activity in other stocks - not necessarily in the same industry as Advantage Solutions Inc. (NASDAQ:ADV) but similarly valued. We will take a look at Aerojet Rocketdyne Holdings Inc (NYSE:AJRD), GoHealth, Inc. (NASDAQ:GOCO), Kinsale Capital Group, Inc. (NASDAQ:KNSL), Olo Inc. (NYSE:OLO), Safehold Inc. (NYSE:SAFE), Physicians Realty Trust (NYSE:DOC), and Companhia Energética de Minas Gerais (NYSE:CIG). All of these stocks' market caps are similar to ADV's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position AJRD,30,786292,-6 GOCO,17,549530,-1 KNSL,17,49810,0 OLO,21,85960,21 SAFE,8,7714,-1 DOC,19,119409,4 CIG,13,65122,1 Average,17.9,237691,2.6 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 17.9 hedge funds with bullish positions and the average amount invested in these stocks was $238 million. That figure was $606 million in ADV's case. Aerojet Rocketdyne Holdings Inc (NYSE:AJRD) is the most popular stock in this table. On the other hand Safehold Inc. (NYSE:SAFE) is the least popular one with only 8 bullish hedge fund positions. Advantage Solutions Inc. (NASDAQ:ADV) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for ADV is 76.4. 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 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 23.8% in 2021 through July 16th and beat the market again by 7.7 percentage points. Unfortunately ADV wasn't nearly as popular as these 5 stocks and hedge funds that were betting on ADV were disappointed as the stock returned -13.5% since the end of March (through 7/16) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as many of these stocks already outperformed the market since 2019.
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Disclosure: None. This article was originally published at Insider Monkey.