We know that hedge funds generate strong, risk-adjusted returns over the long run, therefore imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, smart money 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 (like Peltz's recent General Electric losses). However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, as the current round of 13F filings has just ended, let’s examine the smart money sentiment towards AmeriServ Financial, Inc. (NASDAQ:ASRV).
AmeriServ Financial, Inc. (NASDAQ:ASRV) shares haven't seen a lot of action during the second quarter. Overall, hedge fund sentiment was unchanged. The stock was in 3 hedge funds' portfolios at the end of September. Our calculations also showed that ASRV isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video for a quick look at the top 5 stocks). At the end of this article we will also compare ASRV to other stocks including Gulf Island Fabrication, Inc. (NASDAQ:GIFI), Hallmark Financial Services, Inc. (NASDAQ:HALL), and LSB Industries, Inc. (NYSE:LXU) to get a better sense of its popularity.
Video: Watch our video about the top 5 most popular hedge fund stocks.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? 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 S&P 500 ETFs by more than 66 percentage points since March 2017 (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. Even if you aren't comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.
Jeffrey Gendell of Tontine Asset Management
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 10 most profitable companies in the world to pick the best large-cap stocks to buy. 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 website. Now we're going to take a gander at the recent hedge fund action encompassing AmeriServ Financial, Inc. (NASDAQ:ASRV).
What have hedge funds been doing with AmeriServ Financial, Inc. (NASDAQ:ASRV)?
At Q3's end, a total of 3 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 0% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards ASRV over the last 21 quarters. So, let's review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Renaissance Technologies was the largest shareholder of AmeriServ Financial, Inc. (NASDAQ:ASRV), with a stake worth $2.2 million reported as of the end of September. Trailing Renaissance Technologies was Tontine Asset Management, which amassed a stake valued at $2.1 million. Minerva Advisors was 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 Tontine Asset Management allocated the biggest weight to AmeriServ Financial, Inc. (NASDAQ:ASRV), around 0.44% of its 13F portfolio. Minerva Advisors is also relatively very bullish on the stock, setting aside 0.18 percent of its 13F equity portfolio to ASRV.
Earlier we told you that the aggregate hedge fund interest in the stock was unchanged and we view this as a negative development. Even though there weren't any hedge funds dumping their holdings during the third quarter, there weren't any hedge funds initiating brand new positions. This indicates that hedge funds, at the very best, perceive this stock as dead money and they haven't identified any viable catalysts that can attract investor attention.
Let's also examine hedge fund activity in other stocks similar to AmeriServ Financial, Inc. (NASDAQ:ASRV). These stocks are Gulf Island Fabrication, Inc. (NASDAQ:GIFI), Hallmark Financial Services, Inc. (NASDAQ:HALL), LSB Industries, Inc. (NYSE:LXU), First Seacoast Bancorp (NASDAQ:FSEA), ECMOHO Limited (NASDAQ:MOHO), inTEST Corporation (NASDAQ:INTT), and SilverBow Resorces, Inc. (NYSE:SBOW). This group of stocks' market caps are closest to ASRV's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position GIFI,6,6449,-1 HALL,7,2053,-3 LXU,7,4494,-3 FSEA,2,208,0 MOHO,1,134,0 INTT,3,5510,-1 SBOW,6,19383,-1 Average,4.6,5462,-1.3 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 4.6 hedge funds with bullish positions and the average amount invested in these stocks was $5 million. That figure was $5 million in ASRV's case. Hallmark Financial Services, Inc. (NASDAQ:HALL) is the most popular stock in this table. On the other hand ECMOHO Limited (NASDAQ:MOHO) is the least popular one with only 1 bullish hedge fund positions. AmeriServ Financial, Inc. (NASDAQ:ASRV) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for ASRV is 44.2. 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. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 28.1% in 2020 through November 23rd and still beat the market by 15.4 percentage points. A small number of hedge funds were also right about betting on ASRV as the stock returned 10.6% since the end of the third quarter (through 11/23) and outperformed the market by an even larger margin.
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Disclosure: None. This article was originally published at Insider Monkey.