The 700+ hedge funds and famous money managers tracked by Insider Monkey have already compiled and submitted their 13F filings for the second quarter, which unveil their equity positions as of June 28. We went through these filings, fixed typos and other more significant errors and identified the changes in hedge fund portfolios. Our extensive review of these public filings is finally over, so this article is set to reveal the smart money sentiment towards Associated Capital Group, Inc. (NYSE:AC).
Is Associated Capital Group, Inc. (NYSE:AC) a bargain? The smart money is turning less bullish. The number of long hedge fund positions went down by 1 lately. Our calculations also showed that AC isn't among the 30 most popular stocks among hedge funds (see the video below). AC was in 6 hedge funds' portfolios at the end of June. There were 7 hedge funds in our database with AC holdings at the end of the previous quarter. Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
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.
Unlike former hedge manager, Dr. Steve Sjuggerud, who is convinced Dow will soar past 40000, our long-short investment strategy doesn't rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. Let's take a look at the fresh hedge fund action surrounding Associated Capital Group, Inc. (NYSE:AC).
What have hedge funds been doing with Associated Capital Group, Inc. (NYSE:AC)?
At Q2's end, a total of 6 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -14% from the first quarter of 2019. The graph below displays the number of hedge funds with bullish position in AC over the last 16 quarters. So, let's check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
According to Insider Monkey's hedge fund database, Horizon Asset Management, managed by Murray Stahl, holds the most valuable position in Associated Capital Group, Inc. (NYSE:AC). Horizon Asset Management has a $56.3 million position in the stock, comprising 1.6% of its 13F portfolio. On Horizon Asset Management's heels is Royce & Associates, managed by Chuck Royce, which holds a $7.2 million position; 0.1% of its 13F portfolio is allocated to the stock. Some other professional money managers with similar optimism include Mario Gabelli's GAMCO Investors, Renaissance Technologies and Frederick DiSanto's Ancora Advisors.
We view hedge fund activity in the stock unfavorable, but in this case there was only a single hedge fund selling its entire position: Marshall Wace LLP. 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 750+ hedge funds tracked by Insider Monkey identified AC as a viable investment and initiated a position in the stock.
Let's also examine hedge fund activity in other stocks - not necessarily in the same industry as Associated Capital Group, Inc. (NYSE:AC) but similarly valued. We will take a look at Douglas Dynamics Inc (NYSE:PLOW), Star Bulk Carriers Corp. (NASDAQ:SBLK), TiVo Corporation (NASDAQ:TIVO), and Principia Biopharma Inc. (NASDAQ:PRNB). This group of stocks' market valuations match AC's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position PLOW,7,9945,-4 SBLK,11,449409,-4 TIVO,19,109995,0 PRNB,12,225860,1 Average,12.25,198802,-1.75 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 12.25 hedge funds with bullish positions and the average amount invested in these stocks was $199 million. That figure was $67 million in AC's case. TiVo Corporation (NASDAQ:TIVO) is the most popular stock in this table. On the other hand Douglas Dynamics Inc (NYSE:PLOW) is the least popular one with only 7 bullish hedge fund positions. Compared to these stocks Associated Capital Group, Inc. (NYSE:AC) is even less popular than PLOW. Hedge funds dodged a bullet by taking a bearish stance towards AC. Our calculations showed that the top 20 most popular hedge fund stocks returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Unfortunately AC wasn't nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); AC investors were disappointed as the stock returned -4.8% during the third 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 many of these stocks already outperformed the market so far in 2019.
Disclosure: None. This article was originally published at Insider Monkey.