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Hedge Fund Ardsley Partners’ Top Stock Picks

Sieni Kimalainen

Ardsley Partners was founded back in 1987 by Philip Hempleman, who is the fund’s current Managing Partner, Chief Investment Officer, and Portfolio Manager. He holds a B.A. degree from Indiana University and an M.B.A. degree from New York University. Prior to launching Ardsley Partners, Mr Hempleman gained rich experience working in various hedge funds and firms. Starting off as an Assistant Treasurer at Bankers Trust Company, he later held the position of the company’s Senior Analyst and Portfolio Manage. Later on, he worked at Oppenheimer & Co., Portfolio Manager at Oppenheimer Target and Special Strategies. Finally, as a Managing Director, he managed an equity fund at Trust Company of the West.

Ardsley Partners employs four investment strategies. The first one is its long-biased flagship strategy for US-based life sciences, energy telecom technology and alternative energy companies. Renewable energy-clean tech strategy is being applied in renewable energy sector. The third strategy is long-short equity strategy which combines bottom-up analysis with different factors that impact the industry. And the final one is applied to technology sector, being global long-short equity strategy that’s backed up with fundamental research.

Even though the fund seems to be flexibly employing different strategies, they don’t always seem to bring the best outcome. For example, in 2014 and 2015 the fund delivered negative returns of 0.01% and 4.4% respectively. In 2016, however, it returned a positive 10.5%, following the trend in 2017, with a return of 13.17%, with a drop of 6.34% in 2018. Year to date through June 2019, the fund delivered a positive 7.3%, and generated an annualized return of 8.29%.

[caption id="attachment_687238" align="aligncenter" width="473"] Philip Hempleman of Ardsley Partners[/caption]

Philip Hempleman Ardsley Partners

Insider Monkey’s mission is to identify promising (and also terrible) hedge fund stock pitches and share them with our subscribers. We leave no stone unturned when looking for the next great investment idea. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. This December, we recommended Adams Energy as a one-way bet based on an under-the-radar fund manager's investor letter and the stock is still extremely cheap despite already gaining 25 percent. Earlier this week we explained in an email to our free subscribers why Deswell Industries (DSWL) is deeply undervalued and the stock gained 10%. You can subscribe to our e-newsletters below to get these emails before the rest of the market.

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Our short strategy is based on shorting hedge fund hotels that are likely to experience large hedge fund sales during market weaknesses. We launched this strategy in February 2017. It’s been almost 3 years and the stock picks of this strategy lost a cumulative 27.8% vs. a cumulative gain of 39% for the S&P 500 ETF. This is an absolutely mind blowing performance. The annualized return of our short picks is -9.3%, vs. 12.7% annualized gain for the S&P 500 Index during the same period. The annual alpha of this strategy is 22 percentage points. Jim Chanos doesn’t generate this kind of performance. The best thing about this short strategy is that it provides an excellent hedge during market meltdowns. For example, in Q4 of 2018 when the S&P 500 Index lost nearly 14%, this strategy’s picks lost 25% protecting our premium subscribers from large losses (see the details here).

Our newsletters are successful because we follow hedge fund managers like Philip Hempleman to identify the best and worst hedge fund stock picks. In this article we are going to take a look at Ardsley Partners’ top stock picks. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.1% in 2019 through December 23rd and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. We noticed that none Ardsley Partners’ top 5 stock picks are not among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings).

At the fifth place in the latest Ardsley Partners’ 13F fillings for was Just Energy Group, Inc. (NYSE:JE). The fund boosted this position by 70% during this period, which brought it from the 8th position in its portfolio since Q2. However, only 8 hedge funds were bullish on the stock, which is a decline of 38% compared to the previous quarter. Among them, Ardsley Partners held the most valuable stake in the company, worth $20.7 million, comprising 4.63% of the fund’s portfolio. Renaissance Technologies, Blackstart Capital, and Miller Value Partners were also among the company’s top shareholders, as you can see in more detail here.

Taking the fourth place in Ardsley Partners’ portfolio in Q3 of 2019 was Sunrun Inc (NASDAQ:RUN). The position was cut by 9% during the period, but it nevertheless moved up two places in the fund’s portfolio. Heading to the fourth quarter of 2019, there were 18 hedge funds investing in the company, which is 6% higher than in Q2. Among them, Tiger Global Management was the company’s top shareholder, which reported holding $479.5 million worth of stock. Ardsley Partners was the company’s third top investor for this period, which amassed a stake valued at $21.3 million. Among other hedge funds allocating large portions of their portfolios to Sunrun Inc were Arosa Capital Management, Millennium Management, and Two Sigma Advisors (see more details here).

Ardsley Partners’ third top stock pick for Q3 of 2019 was Enviva Partners, LP (NYSE:EVA), cut by 9% during this period. Investors seem to be less interested in the company, since there were only four hedge funds bullish on the stock, a change of -43% compared to Q2. Ardsley Partners was the company’s second largest shareholder. The fund had a $23.4 million position in the stock, comprising 5.25% of its portfolio. Enviva Partners, LP’s top shareholder for Q3 was ValueAct Capital, holding a stake worth $67.2 million. The remaining two shareholders included Becker Drapkin Management and Citadel Investment Group, as you can read more about it here.

Biohaven Pharmaceutical Holding Company Ltd. (NYSE:BHVN) was Ardsley Partners’ second top stock pick for Q3. The fund seems to be very enthusiastic about the company, since it was boosted by 156%, which brought it up from the 18th place in the portfolio since Q2. A total of 34 hedge funds tracked by Insider Monkey were investing in the company during Q3, a change of -11% since he previous quarter. However, the number of the company’s investors has constantly been rising since the previous two years, as you can see here. The company’s top shareholder was Adage Capital Management, which reported holding $65.7 million worth of stock at the end of the third quarter. Right behind it, among the hedge funds fond of the stock were Cormorant Asset Management, Kingdon Capital, and Citadel Investment Group.

At the top of Ardsley Partners’ most valuable positions for Q3 was Fortress Transportation & Infrastructure Investors Llc (NYSE:FTAI). Boosted by 10%, it moved up from the third place in the fund’s portfolio. Ardsley Partners was the company’s second top shareholder, holding 2,227,000 shares worth $33.8 million, amassing 7.6% of the fund’s portfolio. Apart from this one, there were 11 shareholders more investing in Fortress Transportation & Infrastructure Investors Ll during this period, which is one hedge fund more than in Q2. Caspian Capital Partners held the largest stake in the stock, worth $37.9 million. Among other hedge funds bullish on the stock were Dorset Management, Cruiser, Capital Advisors and Citadel Investment Group.

Disclosure: None. This article was originally published at Insider Monkey.