Legendary investors such as Jeffrey Talpins and Seth Klarman earn enormous amounts of money for themselves and their investors by doing in-depth research on small-cap stocks that big brokerage houses don't publish. Small cap stocks -especially when they are screened well- can generate substantial outperformance versus a boring index fund. That's why we analyze the activity of those elite funds in these small-cap stocks. In the following paragraphs, we analyze Altisource Portfolio Solutions S.A. (NASDAQ:ASPS) from the perspective of those elite funds.
Altisource Portfolio Solutions S.A. (NASDAQ:ASPS) investors should pay attention to a decrease in activity from the world's largest hedge funds in recent months. Our calculations also showed that ASPS isn't among the 30 most popular stocks among hedge funds.
According to most stock holders, hedge funds are perceived as slow, outdated financial vehicles of yesteryear. While there are greater than 8000 funds in operation at the moment, Our researchers hone in on the upper echelon of this club, approximately 750 funds. Most estimates calculate that this group of people administer the lion's share of the smart money's total asset base, and by watching their matchless equity investments, Insider Monkey has spotted numerous investment strategies that have historically beaten the broader indices. Insider Monkey's flagship hedge fund strategy outstripped the S&P 500 index by around 5 percentage points a year since its inception in May 2014 through June 18th. We were able to generate large returns even by identifying short candidates. Our portfolio of short stocks lost 28.2% since February 2017 (through June 18th) even though the market was up nearly 30% during the same period. We just shared a list of 5 short targets in our latest quarterly update and they are already down an average of 8.2% in a month whereas our long picks outperformed the market by 2.5 percentage points in this volatile 5 week period (our long picks also beat the market by 15 percentage points so far this year).
[caption id="attachment_758477" align="aligncenter" width="450"] Andy Redleaf of Whitebox Advisors[/caption]
Let's take a peek at the fresh hedge fund action encompassing Altisource Portfolio Solutions S.A. (NASDAQ:ASPS).
Hedge fund activity in Altisource Portfolio Solutions S.A. (NASDAQ:ASPS)
At Q1's end, a total of 10 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -9% from the fourth quarter of 2018. On the other hand, there were a total of 11 hedge funds with a bullish position in ASPS a year ago. With hedge funds' capital changing hands, there exists a select group of key hedge fund managers who were adding to their holdings considerably (or already accumulated large positions).
The largest stake in Altisource Portfolio Solutions S.A. (NASDAQ:ASPS) was held by Renaissance Technologies, which reported holding $11.6 million worth of stock at the end of March. It was followed by GLG Partners with a $7.1 million position. Other investors bullish on the company included Whitebox Advisors, CQS Cayman LP, and D E Shaw.
We view hedge fund activity in the stock unfavorable, but in this case there was only a single hedge fund selling its entire position: Omega Advisors. One hedge fund selling its entire position doesn't always imply a bearish intent. Theoretically a hedge fund may decide to sell a promising position in order to invest the proceeds in a more promising idea. However, we don't think this is the case in this case because none of the 700+ hedge funds tracked by Insider Monkey identified ASPS as a viable investment and initiated a position in the stock.
Let's now take a look at 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 Gritstone Oncology, Inc. (NASDAQ:GRTS), Target Hospitality Corp. (NASDAQ:TH), CNB Financial Corporation (NASDAQ:CCNE), and Chuy's Holdings Inc (NASDAQ:CHUY). This group of stocks' market caps resemble ASPS's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position GRTS,8,83888,-1 TH,17,86197,17 CCNE,5,27376,1 CHUY,10,32632,-2 Average,10,57523,3.75 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 10 hedge funds with bullish positions and the average amount invested in these stocks was $58 million. That figure was $33 million in ASPS's case. Target Hospitality Corp. (NASDAQ:TH) is the most popular stock in this table. On the other hand CNB Financial Corporation (NASDAQ:CCNE) is the least popular one with only 5 bullish hedge fund positions. Altisource Portfolio Solutions S.A. (NASDAQ:ASPS) 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 6.2% in Q2 through June 19th and outperformed the S&P 500 ETF (SPY) by nearly 3 percentage points. Unfortunately ASPS wasn't nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); ASPS investors were disappointed as the stock returned -18.8% 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 20 most popular stocks among hedge funds as 13 of these stocks already outperformed the market so far in Q2.
Disclosure: None. This article was originally published at Insider Monkey.