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We are still in an overall bull market and many stocks that smart money investors were piling into surged through the end of November. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained 54% and 51% respectively. Hedge funds' top 3 stock picks returned 41.7% this year and beat the S&P 500 ETFs by 14 percentage points. Investing in index funds guarantees you average returns, not superior returns. We are looking to generate superior returns for our readers. 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 Adams Resources & Energy Inc (NYSE:AE).
Hedge fund interest in Adams Resources & Energy Inc (NYSE:AE) shares was flat at the end of last quarter. This is usually a negative indicator. At the end of this article we will also compare AE to other stocks including Goodrich Petroleum Corporation (NYSE:GDP), Manitex International, Inc. (NASDAQ:MNTX), and Oconee Federal Financial Corp. (NASDAQ:OFED) 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.
Today there are many metrics stock market investors employ to size up stocks. A pair of the most under-the-radar metrics are hedge fund and insider trading moves. Our experts have shown that, historically, those who follow the top picks of the elite fund managers can outpace the S&P 500 by a healthy margin (see the details here).
[caption id="attachment_26073" align="aligncenter" width="450"]
Jim Simons of Renaissance Technologies[/caption]
We leave no stone unturned when looking for the next great investment idea. For example Discover is offering this insane cashback card, so we look into shorting the stock. 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 even check out this option genius' weekly trade ideas. 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 already gained 20 percent. Now we're going to take a gander at the latest hedge fund action encompassing Adams Resources & Energy Inc (NYSE:AE).
How are hedge funds trading Adams Resources & Energy Inc (NYSE:AE)?
Heading into the fourth quarter of 2019, a total of 5 of the hedge funds tracked by Insider Monkey were long this stock, a change of 0% from the second quarter of 2019. On the other hand, there were a total of 3 hedge funds with a bullish position in AE a year ago. With hedge funds' sentiment swirling, there exists a select group of noteworthy hedge fund managers who were upping their stakes substantially (or already accumulated large positions).
More specifically, Renaissance Technologies was the largest shareholder of Adams Resources & Energy Inc (NYSE:AE), with a stake worth $9.8 million reported as of the end of September. Trailing Renaissance Technologies was Ancora Advisors, which amassed a stake valued at $1.4 million. Minerva Advisors, Paloma Partners, and Springbok Capital 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 Minerva Advisors allocated the biggest weight to Adams Resources & Energy Inc (NYSE:AE), around 0.55% of its 13F portfolio. Ancora Advisors is also relatively very bullish on the stock, earmarking 0.06 percent of its 13F equity portfolio to AE.
Earlier we told you that the aggregate hedge fund interest in the stock was unchanged and we view this as a negative development. Even though there weren't any hedge funds dumping their holdings during the third quarter, there weren't any hedge funds initiating brand new positions. This indicates that hedge funds, at the very best, perceive this stock as dead money and they haven't identified any viable catalysts that can attract investor attention.
Let's now take a look at hedge fund activity in other stocks - not necessarily in the same industry as Adams Resources & Energy Inc (NYSE:AE) but similarly valued. We will take a look at Goodrich Petroleum Corporation (NYSE:GDP), Manitex International, Inc. (NASDAQ:MNTX), Oconee Federal Financial Corp. (NASDAQ:OFED), and EDAP TMS S.A. (NASDAQ:EDAP). This group of stocks' market valuations match AE's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position GDP,6,24314,1 MNTX,8,10576,0 OFED,2,696,0 EDAP,6,5510,2 Average,5.5,10274,0.75 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 5.5 hedge funds with bullish positions and the average amount invested in these stocks was $10 million. That figure was $12 million in AE's case. Manitex International, Inc. (NASDAQ:MNTX) is the most popular stock in this table. On the other hand Oconee Federal Financial Corp. (NASDAQ:OFED) is the least popular one with only 2 bullish hedge fund positions. Adams Resources & Energy Inc (NYSE:AE) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and 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 AE wasn't nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); AE investors were disappointed as the stock returned 3.7% during the first two months of the fourth quarter 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 70 percent of these stocks already outperformed the market in Q4.
Disclosure: None. This article was originally published at Insider Monkey.