It seems that the masses and most of the financial media hate hedge funds and what they do, but why is this hatred of hedge funds so prominent? At the end of the day, these asset management firms do not gamble the hard-earned money of the people who are on the edge of poverty. Truth be told, most hedge fund managers and other smaller players within this industry are very smart and skilled investors. Of course, they may also make wrong bets in some instances, but no one knows what the future holds and how market participants will react to the bountiful news that floods in each day. The Standard and Poor’s 500 Total Return Index ETFs returned approximately 27.5% in 2019 (through the end of November). Conversely, hedge funds’ top 20 large-cap stock picks generated a return of 37.4% during the same 11-month period, with the majority of these stock picks outperforming the broader market benchmark. Coincidence? It might happen to be so, but it is unlikely. Our research covering the last 18 years indicates that hedge funds' consensus stock picks generate superior risk-adjusted returns. That's why we believe it isn't a waste of time to check out hedge fund sentiment before you invest in a stock like Altisource Portfolio Solutions S.A. (NASDAQ:ASPS).
Altisource Portfolio Solutions S.A. (NASDAQ:ASPS) shares haven't seen a lot of action during the third quarter. Overall, hedge fund sentiment was unchanged. The stock was in 9 hedge funds' portfolios at the end of September. At the end of this article we will also compare ASPS to other stocks including Cellcom Israel Ltd. (NYSE:CEL), Priority Technology Holdings, Inc. (NASDAQ:PRTH), and Regional Management Corp (NYSE:RM) to get a better sense of its popularity. Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
In today’s marketplace there are several signals market participants employ to appraise stocks. A duo of the most useful signals are hedge fund and insider trading activity. Our experts have shown that, historically, those who follow the top picks of the top money managers can beat the market by a very impressive margin (see the details here).
[caption id="attachment_26283" align="aligncenter" width="460"] Leon Cooperman of Omega Advisors[/caption]
We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world's largest cannabis market, so we check out this European marijuana stock pitch. One of the most bullish analysts in America just put his money where his mouth is. He says, "I'm investing more today than I did back in early 2009." So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We also rely on the best performing hedge funds' buy/sell signals. Let's analyze the fresh hedge fund action regarding Altisource Portfolio Solutions S.A. (NASDAQ:ASPS).
How have hedgies been trading Altisource Portfolio Solutions S.A. (NASDAQ:ASPS)?
At Q3's end, a total of 9 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 0% from the previous quarter. By comparison, 12 hedge funds held shares or bullish call options in ASPS a year ago. With the smart money's positions undergoing their usual ebb and flow, there exists a select group of notable hedge fund managers who were adding to their stakes meaningfully (or already accumulated large positions).
The largest stake in Altisource Portfolio Solutions S.A. (NASDAQ:ASPS) was held by Omega Advisors, which reported holding $20.6 million worth of stock at the end of September. It was followed by Renaissance Technologies with a $13 million position. Other investors bullish on the company included Whitebox Advisors, GLG Partners, and CQS Cayman LP. In terms of the portfolio weights assigned to each position Omega Advisors allocated the biggest weight to Altisource Portfolio Solutions S.A. (NASDAQ:ASPS), around 1.22% of its 13F portfolio. Whitebox Advisors is also relatively very bullish on the stock, setting aside 0.19 percent of its 13F equity portfolio to ASPS.
Judging by the fact that Altisource Portfolio Solutions S.A. (NASDAQ:ASPS) has witnessed bearish sentiment from the aggregate hedge fund industry, we can see that there is a sect of fund managers who sold off their full holdings last quarter. Intriguingly, Donald Sussman's Paloma Partners dropped the biggest stake of the 750 funds followed by Insider Monkey, comprising about $0.5 million in stock. John Overdeck and David Siegel's fund, Two Sigma Advisors, also dropped its stock, about $0.4 million worth. These moves are interesting, as total hedge fund interest stayed the same (this is a bearish signal in our experience).
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 Cellcom Israel Ltd. (NYSE:CEL), Priority Technology Holdings, Inc. (NASDAQ:PRTH), Regional Management Corp (NYSE:RM), and Consolidated-Tomoka Land Co. (NYSE:CTO). This group of stocks' market caps match ASPS's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position CEL,2,10880,0 PRTH,3,3524,1 RM,11,79774,0 CTO,12,46392,2 Average,7,35143,0.75 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 7 hedge funds with bullish positions and the average amount invested in these stocks was $35 million. That figure was $50 million in ASPS's case. Consolidated-Tomoka Land Co. (NYSE:CTO) is the most popular stock in this table. On the other hand Cellcom Israel Ltd. (NYSE:CEL) is the least popular one with only 2 bullish hedge fund positions. Altisource Portfolio Solutions S.A. (NASDAQ:ASPS) 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 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately ASPS wasn't nearly as popular as these 20 stocks and hedge funds that were betting on ASPS were disappointed as the stock returned -10.9% during the fourth quarter (through the end of November) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 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.