Should You Avoid Altisource Portfolio Solutions S.A. (ASPS)?
"Since 2006, value stocks (IVE vs IVW) have underperformed 11 of the 13 calendar years and when they beat growth, it wasn't by much. Cumulatively, through this week, it has been a 122% differential (up 52% for value vs up 174% for growth). This appears to be the longest and most severe drought for value investors since data collection began. It will go our way eventually as there are too many people paying far too much for today's darlings, both public and private. Further, the ten-year yield of 2.5% (pre-tax) isn't attractive nor is real estate. We believe the value part of the global equity market is the only place to earn solid risk adjusted returns and we believe those returns will be higher than normal," said Vilas Fund in its Q1 investor letter. We aren't sure whether value stocks outperform growth, but we follow hedge fund investor letters to understand where the markets and stocks might be going. That's why we believe it would be worthwhile to take a look at the hedge fund sentiment on Altisource Portfolio Solutions S.A. (NASDAQ:ASPS) in order to identify whether reputable and successful top money managers continue to believe in its potential.
Altisource Portfolio Solutions S.A. (NASDAQ:ASPS) investors should pay attention to a decrease in hedge fund sentiment lately. ASPS was in 9 hedge funds' portfolios at the end of June. There were 10 hedge funds in our database with ASPS positions at the end of the previous quarter. Our calculations also showed that ASPS isn't among the 30 most popular stocks among hedge funds (see the video below).
Video: Click the image to 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 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 40 percentage points since May 2014 through May 30, 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 25.7% through September 30, 2019. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
In addition to following the biggest hedge funds for investment ideas, we also share stock pitches from conferences, investor letters and other sources like this one where the fund manager is talking about two under the radar 1000% return potential stocks: first one in internet infrastructure and the second in the heart of advertising market. We use hedge fund buy/sell signals to determine whether to conduct in-depth analysis of these stock ideas which take days. Let's view the recent hedge fund action surrounding Altisource Portfolio Solutions S.A. (NASDAQ:ASPS).
How have hedgies been trading Altisource Portfolio Solutions S.A. (NASDAQ:ASPS)?
Heading into the third quarter of 2019, a total of 9 of the hedge funds tracked by Insider Monkey were long this stock, a change of -10% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in ASPS over the last 16 quarters. So, let's see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Of the funds tracked by Insider Monkey, Leon Cooperman's Omega Advisors has the number one position in Altisource Portfolio Solutions S.A. (NASDAQ:ASPS), worth close to $18.6 million, corresponding to 1.1% of its total 13F portfolio. The second largest stake is held by Renaissance Technologies holding a $10.8 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Some other hedge funds and institutional investors with similar optimism consist of Noam Gottesman's GLG Partners, Andy Redleaf's Whitebox Advisors and Michael Hintze's CQS Cayman LP.
Since Altisource Portfolio Solutions S.A. (NASDAQ:ASPS) has witnessed declining sentiment from the aggregate hedge fund industry, logic holds that there lies a certain "tier" of hedgies that decided to sell off their entire stakes by the end of the second quarter. It's worth mentioning that Peter Rathjens, Bruce Clarke and John Campbell's Arrowstreet Capital dumped the biggest investment of the 750 funds tracked by Insider Monkey, comprising an estimated $0.4 million in stock, and Jeffrey Talpins's Element Capital Management was right behind this move, as the fund dumped about $0.2 million worth. These transactions are intriguing to say the least, as aggregate hedge fund interest dropped by 1 funds by the end of the second quarter.
Let's go over hedge fund activity in other stocks - not necessarily in the same industry as Altisource Portfolio Solutions S.A. (NASDAQ:ASPS) but similarly valued. We will take a look at Unifi, Inc. (NYSE:UFI), Forterra, Inc. (NASDAQ:FRTA), NVE Corporation (NASDAQ:NVEC), and Accuray Incorporated (NASDAQ:ARAY). All of these stocks' market caps are similar to ASPS's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position UFI,12,68862,1 FRTA,11,50740,-1 NVEC,7,13666,3 ARAY,17,70095,2 Average,11.75,50841,1.25 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 11.75 hedge funds with bullish positions and the average amount invested in these stocks was $51 million. That figure was $49 million in ASPS's case. Accuray Incorporated (NASDAQ:ARAY) is the most popular stock in this table. On the other hand NVE Corporation (NASDAQ:NVEC) is the least popular one with only 7 bullish hedge fund positions. Altisource Portfolio Solutions S.A. (NASDAQ:ASPS) is not the least popular stock in this group but hedge fund interest is still below average. Our calculations showed that top 20 most popular stocks among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. A small number of hedge funds were also right about betting on ASPS, though not to the same extent, as the stock returned 2.8% during the third quarter and outperformed the market.
Disclosure: None. This article was originally published at Insider Monkey.
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