Is Advanced Disposal Services, Inc. (NYSE:ADSW) a good bet right now? We like to analyze hedge fund sentiment before doing days of in-depth research. We do so because hedge funds and other elite investors have numerous Ivy League graduates, expert network advisers, and supply chain tipsters working or consulting for them. There is not a shortage of news stories covering failed hedge fund investments and it is a fact that hedge funds' picks don't beat the market 100% of the time, but their consensus picks have historically done very well and have outperformed the market after adjusting for risk.
Advanced Disposal Services, Inc. (NYSE:ADSW) investors should pay attention to an increase in hedge fund sentiment in recent months. ADSW was in 15 hedge funds' portfolios at the end of December. There were 12 hedge funds in our database with ADSW holdings at the end of the previous quarter. Our calculations also showed that adsw isn't among the 30 most popular stocks among hedge funds.
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 32 percentage points since May 2014 through March 12, 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 view the key hedge fund action surrounding Advanced Disposal Services, Inc. (NYSE:ADSW).
How are hedge funds trading Advanced Disposal Services, Inc. (NYSE:ADSW)?
At Q4's end, a total of 15 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 25% from the second quarter of 2018. The graph below displays the number of hedge funds with bullish position in ADSW over the last 14 quarters. So, let's see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
When looking at the institutional investors followed by Insider Monkey, Israel Englander's Millennium Management has the largest position in Advanced Disposal Services, Inc. (NYSE:ADSW), worth close to $48.5 million, comprising 0.1% of its total 13F portfolio. The second largest stake is held by Renaissance Technologies, managed by Jim Simons, which holds a $32.5 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Remaining members of the smart money that hold long positions encompass D. E. Shaw's D E Shaw, John Overdeck and David Siegel's Two Sigma Advisors and Jos Shaver's Electron Capital Partners.
As aggregate interest increased, key hedge funds have been driving this bullishness. Arrowstreet Capital, managed by Peter Rathjens, Bruce Clarke and John Campbell, assembled the most valuable position in Advanced Disposal Services, Inc. (NYSE:ADSW). Arrowstreet Capital had $0.7 million invested in the company at the end of the quarter. Minhua Zhang's Weld Capital Management also made a $0.3 million investment in the stock during the quarter. The other funds with new positions in the stock are Hoon Kim's Quantinno Capital and Mario Gabelli's GAMCO Investors.
Let's now take a look at hedge fund activity in other stocks similar to Advanced Disposal Services, Inc. (NYSE:ADSW). We will take a look at RPC, Inc. (NYSE:RES), ABM Industries, Inc. (NYSE:ABM), CoreCivic, Inc. (NYSE:CXW), and Halozyme Therapeutics, Inc. (NASDAQ:HALO). This group of stocks' market values are closest to ADSW's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position RES,12,96642,-3 ABM,12,48851,1 CXW,21,143123,8 HALO,16,199336,-5 Average,15.25,121988,0.25 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 15.25 hedge funds with bullish positions and the average amount invested in these stocks was $122 million. That figure was $123 million in ADSW's case. CoreCivic, Inc. (NYSE:CXW) is the most popular stock in this table. On the other hand RPC, Inc. (NYSE:RES) is the least popular one with only 12 bullish hedge fund positions. Advanced Disposal Services, Inc. (NYSE:ADSW) is not the least popular stock in this group but hedge fund interest is still below average. Our calculations showed that top 15 most popular stocks) among hedge funds returned 24.2% through April 22nd and outperformed the S&P 500 ETF (SPY) by more than 7 percentage points. A small number of hedge funds were also right about betting on ADSW as the stock returned 36.7% and outperformed the market by an even larger margin.
Disclosure: None. This article was originally published at Insider Monkey.