The fourth quarter was a rough one for most investors, as fears of a rising interest rate environment in the U.S, a trade war with China, and a more or less stagnant Europe, weighed heavily on the minds of investors. Both the S&P 500 and Russell 2000 sank as a result, with the Russell 2000, which is composed of smaller companies, being hit especially hard. This was primarily due to hedge funds, which are big supporters of small-cap stocks, pulling some of their capital out of the volatile markets during this time. Let's look at how this market volatility affected the sentiment of hedge funds towards Americold Realty Trust (NYSE:COLD), and what that likely means for the prospects of the company and its stock.
Is Americold Realty Trust (NYSE:COLD) the right investment to pursue these days? The smart money is getting less bullish. The number of long hedge fund positions shrunk by 5 recently. Our calculations also showed that COLD isn't among the 30 most popular stocks among hedge funds. COLD was in 16 hedge funds' portfolios at the end of the fourth quarter of 2018. There were 21 hedge funds in our database with COLD holdings at the end of the previous quarter.
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 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 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 our short portfolio.
We're going to take a look at the recent hedge fund action regarding Americold Realty Trust (NYSE:COLD).
Hedge fund activity in Americold Realty Trust (NYSE:COLD)
At Q4's end, a total of 16 of the hedge funds tracked by Insider Monkey were long this stock, a change of -24% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards COLD over the last 14 quarters. So, let's review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Senator Investment Group held the most valuable stake in Americold Realty Trust (NYSE:COLD), which was worth $212 million at the end of the third quarter. On the second spot was Zimmer Partners which amassed $159.5 million worth of shares. Moreover, Renaissance Technologies, AEW Capital Management, and Waterfront Capital Partners were also bullish on Americold Realty Trust (NYSE:COLD), allocating a large percentage of their portfolios to this stock.
Since Americold Realty Trust (NYSE:COLD) has witnessed a decline in interest from the entirety of the hedge funds we track, it's easy to see that there is a sect of hedgies who were dropping their full holdings heading into Q3. At the top of the heap, Paul Marshall and Ian Wace's Marshall Wace LLP cut the largest investment of all the hedgies tracked by Insider Monkey, valued at about $23.3 million in stock. Benjamin A. Smith's fund, Laurion Capital Management, also sold off its stock, about $11.8 million worth. These moves are interesting, as aggregate hedge fund interest fell by 5 funds heading into Q3.
Let's check out hedge fund activity in other stocks similar to Americold Realty Trust (NYSE:COLD). These stocks are BWX Technologies Inc (NYSE:BWXT), Black Hills Corporation (NYSE:BKH), Pegasystems Inc. (NASDAQ:PEGA), and Spire Inc. (NYSE:SR). This group of stocks' market caps resemble COLD's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position BWXT,19,85950,2 BKH,17,114198,-2 PEGA,19,527867,-3 SR,13,90505,-2 Average,17,204630,-1.25 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 17 hedge funds with bullish positions and the average amount invested in these stocks was $205 million. That figure was $629 million in COLD's case. BWX Technologies Inc (NYSE:BWXT) is the most popular stock in this table. On the other hand Spire Inc. (NYSE:SR) is the least popular one with only 13 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. 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. A small number of hedge funds were also right about betting on COLD, though not to the same extent, as the stock returned 23.6% and outperformed the market as well.
Disclosure: None. This article was originally published at Insider Monkey.