In this article you are going to find out whether hedge funds think Ardmore Shipping Corp (NYSE:ASC) is a good investment right now. We like to check what the smart money thinks first before doing extensive research on a given stock. Although there have been several high profile failed hedge fund picks, the consensus picks among hedge fund investors have historically outperformed the market after adjusting for known risk attributes. It's not surprising given that hedge funds have access to better information and more resources to predict the winners in the stock market.
Ardmore Shipping Corp (NYSE:ASC) shareholders have witnessed an increase in hedge fund interest in recent months. ASC was in 14 hedge funds' portfolios at the end of March. There were 10 hedge funds in our database with ASC holdings at the end of the previous quarter. Our calculations also showed that ASC 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.
Hedge funds' reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn't keep up with the unhedged returns of the market indices. 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 S&P 500 ETFs by 58 percentage points since March 2017 (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.
[caption id="attachment_30614" align="aligncenter" width="393"] Howard Marks of Oaktree Capital Management[/caption]
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, blockchain technology's influence will go beyond online payments. So, we are checking out this futurist's moonshot opportunities in tech stocks. 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. Now let's take a look at the new hedge fund action regarding Ardmore Shipping Corp (NYSE:ASC).
How have hedgies been trading Ardmore Shipping Corp (NYSE:ASC)?
At Q1's end, a total of 14 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 40% from the previous quarter. By comparison, 9 hedge funds held shares or bullish call options in ASC a year ago. With the smart money's positions undergoing their usual ebb and flow, there exists an "upper tier" of key hedge fund managers who were boosting their holdings considerably (or already accumulated large positions).
Among these funds, Royce & Associates held the most valuable stake in Ardmore Shipping Corp (NYSE:ASC), which was worth $7.5 million at the end of the third quarter. On the second spot was Renaissance Technologies which amassed $4 million worth of shares. Oaktree Capital Management, Millennium Management, and GLG Partners 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 Royce & Associates allocated the biggest weight to Ardmore Shipping Corp (NYSE:ASC), around 0.1% of its 13F portfolio. Oaktree Capital Management is also relatively very bullish on the stock, setting aside 0.08 percent of its 13F equity portfolio to ASC.
With a general bullishness amongst the heavyweights, key hedge funds have jumped into Ardmore Shipping Corp (NYSE:ASC) headfirst. Oaktree Capital Management, managed by Howard Marks, assembled the biggest position in Ardmore Shipping Corp (NYSE:ASC). Oaktree Capital Management had $2.8 million invested in the company at the end of the quarter. Steve Cohen's Point72 Asset Management also made a $1.1 million investment in the stock during the quarter. The other funds with new positions in the stock are Paul Marshall and Ian Wace's Marshall Wace LLP, Clint Carlson's Carlson Capital, and Greg Eisner's Engineers Gate Manager.
Let's now take a look at hedge fund activity in other stocks similar to Ardmore Shipping Corp (NYSE:ASC). These stocks are Mid Penn Bancorp, Inc. (NASDAQ:MPB), PennantPark Investment Corp. (NASDAQ:PNNT), Abeona Therapeutics Inc (NASDAQ:ABEO), and Cooper-Standard Holdings Inc (NYSE:CPS). This group of stocks' market valuations are similar to ASC's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position MPB,4,4755,0 PNNT,8,8785,-3 ABEO,19,54889,-3 CPS,11,13018,-3 Average,10.5,20362,-2.25 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 10.5 hedge funds with bullish positions and the average amount invested in these stocks was $20 million. That figure was $23 million in ASC's case. Abeona Therapeutics Inc (NASDAQ:ABEO) is the most popular stock in this table. On the other hand Mid Penn Bancorp, Inc. (NASDAQ:MPB) is the least popular one with only 4 bullish hedge fund positions. Ardmore Shipping Corp (NYSE:ASC) 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 13.3% in 2020 through June 25th but beat the market by 16.8 percentage points. Unfortunately ASC wasn't nearly as popular as these 10 stocks and hedge funds that were betting on ASC were disappointed as the stock returned -17.1% 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.