The financial regulations require hedge funds and wealthy investors that exceeded the $100 million equity holdings threshold to file a report that shows their positions at the end of every quarter. Even though it isn't the intention, these filings to a certain extent level the playing field for ordinary investors. The latest round of 13F filings disclosed the funds' positions on March 31st, about a week after the S&P 500 Index bottomed. We at Insider Monkey have made an extensive database of more than 821 of those established hedge funds and famous value investors' filings. In this article, we analyze how these elite funds and prominent investors traded Advanced Emissions Solutions, Inc. (NASDAQ:ADES) based on those filings.
Is Advanced Emissions Solutions, Inc. (NASDAQ:ADES) the right investment to pursue these days? Hedge funds are reducing their bets on the stock. The number of long hedge fund bets were trimmed by 2 lately. Our calculations also showed that ADES 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.
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey's monthly stock picks returned 101% since March 2017 and outperformed the S&P 500 ETFs by more than 58 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That's why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
[caption id="attachment_845793" align="aligncenter" width="400"] Peter Rathjens of Arrowstreet Capital[/caption]
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, We take a look at lists like the 10 most profitable companies in the world to identify the compounders that are likely to deliver double digit returns. We interview hedge fund managers and ask them about their best ideas. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. For example we are checking out stocks recommended/scorned by legendary Bill Miller. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 in February after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind let's take a look at the latest hedge fund action regarding Advanced Emissions Solutions, Inc. (NASDAQ:ADES).
How have hedgies been trading Advanced Emissions Solutions, Inc. (NASDAQ:ADES)?
Heading into the second quarter of 2020, a total of 8 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -20% from the previous quarter. The graph below displays the number of hedge funds with bullish position in ADES over the last 18 quarters. With the smart money's sentiment swirling, there exists a select group of key hedge fund managers who were upping their stakes substantially (or already accumulated large positions).
More specifically, Alta Fundamental Advisers was the largest shareholder of Advanced Emissions Solutions, Inc. (NASDAQ:ADES), with a stake worth $12.9 million reported as of the end of September. Trailing Alta Fundamental Advisers was MFP Investors, which amassed a stake valued at $4 million. Arrowstreet Capital, Millennium Management, and Marshall Wace LLP 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 Alta Fundamental Advisers allocated the biggest weight to Advanced Emissions Solutions, Inc. (NASDAQ:ADES), around 19.08% of its 13F portfolio. MFP Investors is also relatively very bullish on the stock, designating 0.82 percent of its 13F equity portfolio to ADES.
Since Advanced Emissions Solutions, Inc. (NASDAQ:ADES) has faced a decline in interest from the smart money, we can see that there exists a select few funds who sold off their positions entirely last quarter. It's worth mentioning that Michael Gelband's ExodusPoint Capital cut the largest position of the 750 funds watched by Insider Monkey, totaling close to $0.3 million in stock. Roger Ibbotson's fund, Zebra Capital Management, also cut its stock, about $0.2 million worth. These transactions are important to note, as aggregate hedge fund interest fell by 2 funds last quarter.
Let's check out hedge fund activity in other stocks similar to Advanced Emissions Solutions, Inc. (NASDAQ:ADES). We will take a look at Enzo Biochem, Inc. (NYSE:ENZ), Evans Bancorp Inc. (NYSE:EVBN), Mayville Engineering Company, Inc. (NYSE:MEC), and The Eastern Company (NASDAQ:EML). This group of stocks' market caps are similar to ADES's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position ENZ,9,25971,-2 EVBN,2,811,-1 MEC,4,2896,-3 EML,6,34418,0 Average,5.25,16024,-1.5 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 5.25 hedge funds with bullish positions and the average amount invested in these stocks was $16 million. That figure was $22 million in ADES's case. Enzo Biochem, Inc. (NYSE:ENZ) is the most popular stock in this table. On the other hand Evans Bancorp Inc. (NYSE:EVBN) is the least popular one with only 2 bullish hedge fund positions. Advanced Emissions Solutions, Inc. (NASDAQ:ADES) is not the most popular stock in this group but hedge fund interest is still above average. 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 12.2% in 2020 through June 17th but beat the market by 14.8 percentage points. Unfortunately ADES wasn't nearly as popular as these 10 stocks and hedge funds that were betting on ADES were disappointed as the stock returned -24.7% 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.
Disclosure: None. This article was originally published at Insider Monkey.