U.S. Markets close in 3 hrs 56 mins

Is Artesian Resources Corporation (ARTNA) Going to Burn These Hedge Funds?

Nina Todic

While the market driven by short-term sentiment influenced by the accomodative interest rate environment in the US, increasing oil prices and deteriorating expectations towards the resolution of the trade war with China, many smart money investors kept their cautious approach regarding the current bull run in the third quarter and hedging or reducing many of their long positions. Some fund managers are betting on Dow hitting 40,000 to generate strong returns. However, as we know, big investors usually buy stocks with strong fundamentals that can deliver gains both in bull and bear markets, which is why we believe we can profit from imitating them. In this article, we are going to take a look at the smart money sentiment surrounding Artesian Resources Corporation (NASDAQ:ARTNA).

Artesian Resources Corporation (NASDAQ:ARTNA) shares haven't seen a lot of action during the third quarter. Overall, hedge fund sentiment was unchanged. The stock was in 3 hedge funds' portfolios at the end of the third quarter of 2019. The level and the change in hedge fund popularity aren't the only variables you need to analyze to decipher hedge funds' perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That's why at the end of this article we will examine companies such as Vera Bradley, Inc. (NASDAQ:VRA), Consolidated Communications Holdings Inc (NASDAQ:CNSL), and Atreca, Inc. (NASDAQ:BCEL) to gather more data points. Our calculations also showed that ARTNA isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings). Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

5 Most Popular Stocks Among Hedge Funds

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 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. 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.

[caption id="attachment_27209" align="aligncenter" width="444"] Jim Simons of Renaissance Technologies[/caption]

RENAISSANCE TECHNOLOGIES

We leave no stone unturned when looking for the next great investment idea. For example Discover is offering this insane cashback card, so we look into shorting the stock. 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. We even check out this option genius' weekly trade ideas. 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 already gained 20 percent. Now we're going to go over the recent hedge fund action surrounding Artesian Resources Corporation (NASDAQ:ARTNA).

How have hedgies been trading Artesian Resources Corporation (NASDAQ:ARTNA)?

At Q3's end, a total of 3 of the hedge funds tracked by Insider Monkey were long this stock, a change of 0% from one quarter earlier. On the other hand, there were a total of 4 hedge funds with a bullish position in ARTNA a year ago. With hedgies' capital changing hands, there exists an "upper tier" of key hedge fund managers who were increasing their stakes significantly (or already accumulated large positions).

Among these funds, Renaissance Technologies held the most valuable stake in Artesian Resources Corporation (NASDAQ:ARTNA), which was worth $14.9 million at the end of the third quarter. On the second spot was Water Asset Management which amassed $2.2 million worth of shares. Arrowstreet Capital 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 Water Asset Management allocated the biggest weight to Artesian Resources Corporation (NASDAQ:ARTNA), around 3.41% of its 13F portfolio. Renaissance Technologies is also relatively very bullish on the stock, designating 0.01 percent of its 13F equity portfolio to ARTNA.

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 - not necessarily in the same industry as Artesian Resources Corporation (NASDAQ:ARTNA) but similarly valued. These stocks are Vera Bradley, Inc. (NASDAQ:VRA), Consolidated Communications Holdings Inc (NASDAQ:CNSL), Atreca, Inc. (NASDAQ:BCEL), and Care.com Inc (NYSE:CRCM). All of these stocks' market caps are closest to ARTNA's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position VRA,15,56748,-1 CNSL,20,19802,6 BCEL,6,88230,-3 CRCM,17,115902,-4 Average,14.5,70171,-0.5 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 14.5 hedge funds with bullish positions and the average amount invested in these stocks was $70 million. That figure was $17 million in ARTNA's case. Consolidated Communications Holdings Inc (NASDAQ:CNSL) is the most popular stock in this table. On the other hand Atreca, Inc. (NASDAQ:BCEL) is the least popular one with only 6 bullish hedge fund positions. Compared to these stocks Artesian Resources Corporation (NASDAQ:ARTNA) is even less popular than BCEL. Hedge funds dodged a bullet by taking a bearish stance towards ARTNA. Our calculations showed that the top 20 most popular hedge fund stocks returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately ARTNA wasn't nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); ARTNA investors were disappointed as the stock returned 1.2% during the fourth quarter (through the end of November) 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 70 percent of these stocks already outperformed the market so far in Q4.

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

Related Content