Investing in small cap stocks has historically been a way to outperform the market, as small cap companies typically grow faster on average than the blue chips. That outperformance comes with a price, however, as there are occasional periods of higher volatility. The fourth quarter of 2018 is one of those periods, as the Russell 2000 ETF (IWM) has underperformed the larger S&P 500 ETF (SPY) by nearly 7 percentage points. Given that the funds we track tend to have a disproportionate amount of their portfolios in smaller cap stocks, they have seen some volatility in their portfolios too. Actually their moves are potentially one of the factors that contributed to this volatility. In this article, we use our extensive database of hedge fund holdings to find out what the smart money thinks of Asbury Automotive Group, Inc. (NYSE:ABG).
Asbury Automotive Group, Inc. (NYSE:ABG) has seen a decrease in activity from the world's largest hedge funds in recent months. Our calculations also showed that ABG isn't among the 30 most popular stocks among hedge funds.
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' large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the market by 32 percentage points since May 2014 through March 12, 2019 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that'll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 27.5% through March 12, 2019. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
We're going to analyze the recent hedge fund action encompassing Asbury Automotive Group, Inc. (NYSE:ABG).
What does the smart money think about Asbury Automotive Group, Inc. (NYSE:ABG)?
Heading into the first quarter of 2019, a total of 16 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -6% from the previous quarter. By comparison, 18 hedge funds held shares or bullish call options in ABG a year ago. So, let's see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
According to Insider Monkey's hedge fund database, Abrams Capital Management, managed by David Abrams, holds the most valuable position in Asbury Automotive Group, Inc. (NYSE:ABG). Abrams Capital Management has a $126.8 million position in the stock, comprising 5.2% of its 13F portfolio. Sitting at the No. 2 spot is Eminence Capital, led by Ricky Sandler, holding a $25.7 million position; the fund has 0.5% of its 13F portfolio invested in the stock. Some other professional money managers that hold long positions contain Noam Gottesman's GLG Partners, Jim Simons's Renaissance Technologies and Dmitry Balyasny's Balyasny Asset Management.
Judging by the fact that Asbury Automotive Group, Inc. (NYSE:ABG) has witnessed bearish sentiment from the smart money, it's easy to see that there is a sect of hedge funds who were dropping their full holdings in the third quarter. Intriguingly, Steve Cohen's Point72 Asset Management cut the biggest position of all the hedgies monitored by Insider Monkey, worth about $3.1 million in stock, and Gregory Fraser, Rudolph Kluiber, and Timothy Krochuk's GRT Capital Partners was right behind this move, as the fund sold off about $0.6 million worth. These moves are important to note, as total hedge fund interest was cut by 1 funds in the third quarter.
Let's also examine hedge fund activity in other stocks - not necessarily in the same industry as Asbury Automotive Group, Inc. (NYSE:ABG) but similarly valued. We will take a look at Ferro Corporation (NYSE:FOE), Hawaiian Holdings, Inc. (NASDAQ:HA), Tabula Rasa HealthCare, Inc. (NASDAQ:TRHC), and Matthews International Corp (NASDAQ:MATW). This group of stocks' market caps match ABG's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position FOE,19,210568,1 HA,14,86673,0 TRHC,12,24139,2 MATW,12,53497,0 Average,14.25,93719,0.75 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 14.25 hedge funds with bullish positions and the average amount invested in these stocks was $94 million. That figure was $185 million in ABG's case. Ferro Corporation (NYSE:FOE) is the most popular stock in this table. On the other hand Tabula Rasa HealthCare, Inc. (NASDAQ:TRHC) is the least popular one with only 12 bullish hedge fund positions. Asbury Automotive Group, Inc. (NYSE:ABG) is not the most popular stock in this group but hedge fund interest is still above average. 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 15 most popular stocks) among hedge funds returned 24.2% through April 22nd and outperformed the S&P 500 ETF (SPY) by more than 7 percentage points. Unfortunately ABG wasn't nearly as popular as these 15 stock and hedge funds that were betting on ABG were disappointed as the stock returned 10% and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 15 most popular stocks) among hedge funds as 13 of these stocks already outperformed the market this year.
Disclosure: None. This article was originally published at Insider Monkey.