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In this article we will analyze whether American Renal Associates Holdings, Inc (NYSE:ARA) is a good investment right now by following the lead of some of the best investors in the world and piggybacking their ideas. There's no better way to get these firms' immense resources and analytical capabilities working for us than to follow their lead into their best ideas. While not all of these picks will be winners, our research shows that these picks historically outperformed the market by double digits annually.
American Renal Associates Holdings, Inc (NYSE:ARA) shares haven't seen a lot of action during the second quarter. Overall, hedge fund sentiment was unchanged. The stock was in 5 hedge funds' portfolios at the end of September. Our calculations also showed that ARA isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video for a quick look at the top 5 stocks). At the end of this article we will also compare ARA to other stocks including TELA Bio, Inc. (NASDAQ:TELA), Eiger BioPharmaceuticals, Inc. (NASDAQ:EIGR), and Value Line, Inc. (NASDAQ:VALU) to get a better sense of its popularity.
Video: Watch our video about the top 5 most popular hedge fund stocks.
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey's monthly stock picks returned 113% since March 2017 and outperformed the S&P 500 ETFs by more than 66 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That's why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
Peter Rathjens of Arrowstreet Capital
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 15 best blue chip stocks to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our website. Now we're going to take a peek at the fresh hedge fund action surrounding American Renal Associates Holdings, Inc (NYSE:ARA).
What does smart money think about American Renal Associates Holdings, Inc (NYSE:ARA)?
At Q3's end, a total of 5 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 0% from the previous quarter. The graph below displays the number of hedge funds with bullish position in ARA over the last 21 quarters. With the smart money's positions undergoing their usual ebb and flow, there exists a few noteworthy hedge fund managers who were adding to their stakes considerably (or already accumulated large positions).
Of the funds tracked by Insider Monkey, Centerbridge Partners, managed by Mark T. Gallogly, holds the number one position in American Renal Associates Holdings, Inc (NYSE:ARA). Centerbridge Partners has a $121.5 million position in the stock, comprising 13.6% of its 13F portfolio. The second most bullish fund Renaissance Technologies, with a $7.7 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Remaining peers that hold long positions comprise D. E. Shaw's D E Shaw, Peter Rathjens, Bruce Clarke and John Campbell's Arrowstreet Capital and Ken Griffin's Citadel Investment Group. In terms of the portfolio weights assigned to each position Centerbridge Partners allocated the biggest weight to American Renal Associates Holdings, Inc (NYSE:ARA), around 13.6% of its 13F portfolio. Renaissance Technologies is also relatively very bullish on the stock, setting aside 0.01 percent of its 13F equity portfolio to ARA.
Seeing as American Renal Associates Holdings, Inc (NYSE:ARA) has witnessed a decline in interest from hedge fund managers, it's safe to say that there exists a select few money managers that elected to cut their full holdings in the third quarter. At the top of the heap, John Overdeck and David Siegel's Two Sigma Advisors dumped the biggest stake of the 750 funds tracked by Insider Monkey, valued at about $0.1 million in stock. Donald Sussman's fund, Paloma Partners, also sold off its stock, about $0.1 million worth. These moves are important to note, 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 American Renal Associates Holdings, Inc (NYSE:ARA) but similarly valued. These stocks are TELA Bio, Inc. (NASDAQ:TELA), Eiger BioPharmaceuticals, Inc. (NASDAQ:EIGR), Value Line, Inc. (NASDAQ:VALU), Astronics Corporation (NASDAQ:ATRO), NVE Corporation (NASDAQ:NVEC), A-Mark Precious Metals, Inc. (NASDAQ:AMRK), and Akumin Inc. (NASDAQ:AKU). This group of stocks' market values match ARA's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position TELA,7,75777,-2 EIGR,26,87225,0 VALU,2,2198,0 ATRO,21,50971,-2 NVEC,9,16734,0 AMRK,4,6932,2 AKU,3,47643,3 Average,10.3,41069,0.1 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 10.3 hedge funds with bullish positions and the average amount invested in these stocks was $41 million. That figure was $130 million in ARA's case. Eiger BioPharmaceuticals, Inc. (NASDAQ:EIGR) is the most popular stock in this table. On the other hand Value Line, Inc. (NASDAQ:VALU) is the least popular one with only 2 bullish hedge fund positions. American Renal Associates Holdings, Inc (NYSE:ARA) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for ARA is 24.9. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 30.7% in 2020 through November 27th and still beat the market by 16.1 percentage points. A small number of hedge funds were also right about betting on ARA as the stock returned 65.5% since the end of the third quarter (through 11/27) and outperformed the market by an even larger margin.
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Disclosure: None. This article was originally published at Insider Monkey.