Hedge funds and large money managers usually invest with a focus on the long-term horizon and, therefore, short-lived dips or bumps on the charts, usually don't make them change their opinion towards a company. This time it may be different. During the fourth quarter of 2018 we observed increased volatility and small-cap stocks underperformed the market. Things completely reversed during the first quarter. Hedge fund investor letters indicated that they are cutting their overall exposure, closing out some position and doubling down on others. Let’s take a look at the hedge fund sentiment towards Associated Banc-Corp (NYSE:ASB) to find out whether it was one of their high conviction long-term ideas.
Is Associated Banc-Corp (NYSE:ASB) worth your attention right now? Hedge funds are reducing their bets on the stock. The number of long hedge fund positions fell by 2 lately. Our calculations also showed that asb isn't among the 30 most popular stocks among hedge funds. ASB was in 16 hedge funds' portfolios at the end of March. There were 18 hedge funds in our database with ASB positions at the end of the previous quarter.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? 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 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 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. Even if you aren't comfortable with shorting stocks, you should at least avoid initiating long positions in our short portfolio.
Let's take a look at the key hedge fund action encompassing Associated Banc-Corp (NYSE:ASB).
What does smart money think about Associated Banc-Corp (NYSE:ASB)?
At Q1's end, a total of 16 of the hedge funds tracked by Insider Monkey were long this stock, a change of -11% from the previous quarter. By comparison, 19 hedge funds held shares or bullish call options in ASB a year ago. So, let's see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Associated Banc-Corp (NYSE:ASB) was held by Citadel Investment Group, which reported holding $60 million worth of stock at the end of March. It was followed by Millennium Management with a $45.5 million position. Other investors bullish on the company included Pzena Investment Management, AQR Capital Management, and Balyasny Asset Management.
Due to the fact that Associated Banc-Corp (NYSE:ASB) has faced falling interest from the aggregate hedge fund industry, we can see that there was a specific group of money managers that elected to cut their positions entirely by the end of the third quarter. It's worth mentioning that George Soros's Soros Fund Management said goodbye to the largest investment of the "upper crust" of funds followed by Insider Monkey, comprising an estimated $2.2 million in stock, and Benjamin A. Smith's Laurion Capital Management was right behind this move, as the fund cut about $0.9 million worth. These bearish behaviors are important to note, as aggregate hedge fund interest fell by 2 funds by the end of the third quarter.
Let's now take a look at hedge fund activity in other stocks - not necessarily in the same industry as Associated Banc-Corp (NYSE:ASB) but similarly valued. We will take a look at Hancock Whitney Corporation (NASDAQ:HWC), First Hawaiian, Inc. (NASDAQ:FHB), Allogene Therapeutics, Inc. (NASDAQ:ALLO), and Regal Beloit Corporation (NYSE:RBC). This group of stocks' market caps match ASB's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position HWC,15,112402,0 FHB,23,384375,2 ALLO,8,120844,-2 RBC,17,130444,0 Average,15.75,187016,0 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 15.75 hedge funds with bullish positions and the average amount invested in these stocks was $187 million. That figure was $216 million in ASB's case. First Hawaiian, Inc. (NASDAQ:FHB) is the most popular stock in this table. On the other hand Allogene Therapeutics, Inc. (NASDAQ:ALLO) is the least popular one with only 8 bullish hedge fund positions. Associated Banc-Corp (NYSE:ASB) 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 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 ASB wasn't nearly as popular as these 20 stocks and hedge funds that were betting on ASB were disappointed as the stock returned -1.9% during the same 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.