Did Hedge Funds Make The Right Call On Americold Realty Trust (COLD)?
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). 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 Americold Realty Trust (NYSE:COLD) at the end of the first quarter and determine whether the smart money was really smart about this stock.
Is Americold Realty Trust (NYSE:COLD) a great investment right now? The smart money was taking a pessimistic view. The number of bullish hedge fund bets went down by 1 in recent months. Our calculations also showed that COLD isn't among the 30 most popular stocks among hedge funds (click for Q1 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 58 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 36% through May 18th. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
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Louis Bacon Moore of Moore Capital[/caption]
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, legal marijuana is one of the fastest growing industries right now, so we are checking out stock pitches like "the Starbucks of cannabis" to identify the next tenbagger. 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. Hedge fund sentiment towards Tesla reached its all time high at the end of 2019 and Tesla shares more than tripled this year. We are trying to identify other EV revolution winners, so if you have any good ideas send us an email. Keeping this in mind let's view the latest hedge fund action surrounding Americold Realty Trust (NYSE:COLD).
Hedge fund activity in Americold Realty Trust (NYSE:COLD)
At Q1's end, a total of 25 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -4% from the fourth quarter of 2019. Below, you can check out the change in hedge fund sentiment towards COLD over the last 18 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.
Among these funds, D E Shaw held the most valuable stake in Americold Realty Trust (NYSE:COLD), which was worth $108 million at the end of the third quarter. On the second spot was V3 Capital which amassed $40.4 million worth of shares. Millennium Management, Waterfront Capital Partners, and JS Capital were 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 V3 Capital allocated the biggest weight to Americold Realty Trust (NYSE:COLD), around 8.84% of its 13F portfolio. SkyTop Capital Management is also relatively very bullish on the stock, earmarking 6.46 percent of its 13F equity portfolio to COLD.
Because Americold Realty Trust (NYSE:COLD) has experienced declining sentiment from the smart money, we can see that there lies a certain "tier" of money managers that decided to sell off their full holdings last quarter. Intriguingly, Dmitry Balyasny's Balyasny Asset Management sold off the biggest stake of the "upper crust" of funds followed by Insider Monkey, worth close to $30.7 million in stock. Louis Bacon's fund, Moore Global Investments, also dropped its stock, about $20.1 million worth. These transactions are intriguing to say the least, as aggregate hedge fund interest fell by 1 funds last quarter.
Let's check out hedge fund activity in other stocks similar to Americold Realty Trust (NYSE:COLD). These stocks are Mobile TeleSystems OJSC (NYSE:MBT), Mellanox Technologies, Ltd. (NASDAQ:MLNX), Kilroy Realty Corp (NYSE:KRC), and Hill-Rom Holdings, Inc. (NYSE:HRC). This group of stocks' market values match COLD's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position MBT,9,377645,-4 MLNX,44,1873688,5 KRC,20,180763,2 HRC,30,738463,3 Average,25.75,792640,1.5 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 25.75 hedge funds with bullish positions and the average amount invested in these stocks was $793 million. That figure was $276 million in COLD's case. Mellanox Technologies, Ltd. (NASDAQ:MLNX) is the most popular stock in this table. On the other hand Mobile TeleSystems OJSC (NYSE:MBT) is the least popular one with only 9 bullish hedge fund positions. Americold Realty Trust (NYSE:COLD) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and 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 12.3% in 2020 through June 30th and surpassed the market by 15.5 percentage points. Unfortunately COLD wasn't nearly as popular as these 10 stocks (hedge fund sentiment was quite bearish); COLD investors were disappointed as the stock returned 7.3% during the second quarter 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 most of these stocks already outperformed the market in 2020.
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Disclosure: None. This article was originally published at Insider Monkey.
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