At Insider Monkey we track the activity of some of the best-performing hedge funds like Appaloosa Management, Baupost, and Tiger Global because we determined that some of the stocks that they are collectively bullish on can help us generate returns above the broader indices. Out of thousands of stocks that hedge funds invest in, small-caps can provide the best returns over the long term due to the fact that these companies are less efficiently priced and are usually under the radars of mass-media, analysts and dumb money. This is why we follow the smart money moves in the small-cap space.
Is Americold Realty Trust (NYSE:COLD) undervalued? Prominent investors are buying. The number of bullish hedge fund positions advanced by 3 recently. Our calculations also showed that COLD isn't among the 30 most popular stocks among hedge funds (see the video below). COLD was in 30 hedge funds' portfolios at the end of the second quarter of 2019. There were 27 hedge funds in our database with COLD holdings at the end of the previous quarter. Video: Click the image to 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 hedge funds' large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the market by 40 percentage points since May 2014 through May 30, 2019 (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 25.7% through September 30, 2019. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Unlike former hedge manager, Dr. Steve Sjuggerud, who is convinced Dow will soar past 40000, our long-short investment strategy doesn't rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. Let's view the latest hedge fund action encompassing Americold Realty Trust (NYSE:COLD).
How have hedgies been trading Americold Realty Trust (NYSE:COLD)?
Heading into the third quarter of 2019, a total of 30 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 11% from one quarter earlier. On the other hand, there were a total of 10 hedge funds with a bullish position in COLD a year ago. With hedge funds' positions undergoing their usual ebb and flow, there exists a few key hedge fund managers who were adding to their holdings meaningfully (or already accumulated large positions).
The largest stake in Americold Realty Trust (NYSE:COLD) was held by Citadel Investment Group, which reported holding $170.1 million worth of stock at the end of March. It was followed by Senator Investment Group with a $113.5 million position. Other investors bullish on the company included Zimmer Partners, AEW Capital Management, and Millennium Management.
As industrywide interest jumped, specific money managers were leading the bulls' herd. Third Point, managed by Dan Loeb, assembled the most valuable position in Americold Realty Trust (NYSE:COLD). Third Point had $41.5 million invested in the company at the end of the quarter. Louis Bacon's Moore Global Investments also initiated a $41 million position during the quarter. The other funds with brand new COLD positions are Noam Gottesman's GLG Partners, Jonathan Soros's JS Capital, and Steve Cohen's Point72 Asset Management.
Let's now review hedge fund activity in other stocks similar to Americold Realty Trust (NYSE:COLD). These stocks are Herbalife Nutrition Ltd. (NYSE:HLF), American Campus Communities, Inc. (NYSE:ACC), Pentair plc (NYSE:PNR), and PRA Health Sciences Inc (NASDAQ:PRAH). This group of stocks' market caps are similar to COLD's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position HLF,27,2752898,-5 ACC,17,373471,-2 PNR,21,546471,-7 PRAH,25,340888,-3 Average,22.5,1003432,-4.25 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 22.5 hedge funds with bullish positions and the average amount invested in these stocks was $1003 million. That figure was $909 million in COLD's case. Herbalife Nutrition Ltd. (NYSE:HLF) is the most popular stock in this table. On the other hand American Campus Communities, Inc. (NYSE:ACC) is the least popular one with only 17 bullish hedge fund positions. Compared to these stocks Americold Realty Trust (NYSE:COLD) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Hedge funds were also right about betting on COLD as the stock returned 15% during Q3 and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.
Disclosure: None. This article was originally published at Insider Monkey.