At the end of February we announced the arrival of the first US recession since 2009 and we predicted that the market will decline by at least 20% in (see why hell is coming). We reversed our stance on March 25th after seeing unprecedented fiscal and monetary stimulus unleashed by the Fed and the Congress. This is the perfect market for stock pickers, now that the stocks are fully valued again. In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. In this article, we will take a closer look at hedge fund sentiment towards Ashland Global Holdings Inc.. (NYSE:ASH) at the end of the second quarter and determine whether the smart money was really smart about this stock.
Ashland Global Holdings Inc.. (NYSE:ASH) shares haven't seen a lot of action during the second quarter. Overall, hedge fund sentiment was unchanged. The stock was in 32 hedge funds' portfolios at the end of June. Our calculations also showed that ASH isn't among the 30 most popular stocks among hedge funds (click for Q2 rankings and see the video for a quick look at the top 5 stocks). 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 TerraForm Power Inc (NASDAQ:TERP), Exponent, Inc. (NASDAQ:EXPO), and Pilgrim's Pride Corporation (NASDAQ:PPC) to gather more data points. Our calculations also showed that ASH isn't among the 30 most popular stocks among hedge funds (click for Q2 rankings and see the video for a quick look at the top 5 stocks). Video: Watch our video about the top 5 most popular hedge fund stocks.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 56 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'll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 34% through August 17th. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Ricky Sandler of Eminence Capital
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, this “mom” trader turned $2000 into $2 million within 2 years. So, we are checking out her best trade idea of the month. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. 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. Now we're going to take a look at the recent hedge fund action surrounding Ashland Global Holdings Inc.. (NYSE:ASH).
How have hedgies been trading Ashland Global Holdings Inc.. (NYSE:ASH)?
At the end of June, a total of 32 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 0% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards ASH over the last 20 quarters. So, let's find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Ashland Global Holdings Inc.. (NYSE:ASH) was held by Eminence Capital, which reported holding $389.4 million worth of stock at the end of September. It was followed by Diamond Hill Capital with a $124.5 million position. Other investors bullish on the company included Cruiser Capital Advisors, Omega Advisors, and Millennium Management. In terms of the portfolio weights assigned to each position Cruiser Capital Advisors allocated the biggest weight to Ashland Global Holdings Inc.. (NYSE:ASH), around 64.59% of its 13F portfolio. Omega Advisors is also relatively very bullish on the stock, earmarking 6.1 percent of its 13F equity portfolio to ASH.
Since Ashland Global Holdings Inc.. (NYSE:ASH) has witnessed falling interest from the entirety of the hedge funds we track, we can see that there lies a certain "tier" of funds that slashed their positions entirely in the second quarter. Intriguingly, James Dinan's York Capital Management dumped the largest investment of all the hedgies tracked by Insider Monkey, worth close to $23.1 million in stock. Andrew Byington's fund, Appian Way Asset Management, also dumped its stock, about $7.5 million worth. These transactions are important to note, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).
Let's now take a look at hedge fund activity in other stocks similar to Ashland Global Holdings Inc.. (NYSE:ASH). These stocks are TerraForm Power Inc (NASDAQ:TERP), Exponent, Inc. (NASDAQ:EXPO), Pilgrim's Pride Corporation (NASDAQ:PPC), Allison Transmission Holdings Inc (NYSE:ALSN), L Brands Inc (NYSE:LB), AGCO Corporation (NYSE:AGCO), and Penn National Gaming, Inc (NASDAQ:PENN). All of these stocks' market caps resemble ASH's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position TERP,21,235830,4 EXPO,19,92487,2 PPC,15,59157,-3 ALSN,32,542648,5 LB,42,1472803,3 AGCO,21,144524,2 PENN,34,429102,16 Average,26.3,425222,4.1 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 26.3 hedge funds with bullish positions and the average amount invested in these stocks was $425 million. That figure was $976 million in ASH's case. L Brands Inc (NYSE:LB) is the most popular stock in this table. On the other hand Pilgrim's Pride Corporation (NASDAQ:PPC) is the least popular one with only 15 bullish hedge fund positions. Ashland Global Holdings Inc.. (NYSE:ASH) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for ASH is 62.4. 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 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 23.8% in 2020 through September 14th and beat the market by 17.6 percentage points. Unfortunately ASH wasn't nearly as popular as these 10 stocks and hedge funds that were betting on ASH were disappointed as the stock returned 6.1% during the same time period and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.
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Disclosure: None. This article was originally published at Insider Monkey.