We hate to say this but, we told you so. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW and predicted a US recession when the S&P 500 Index was trading at the 3150 level. We also told you to short the market and buy long-term Treasury bonds. Our article also called for a total international travel ban. While we were warning you, President Trump minimized the threat and failed to act promptly. As a result of his inaction, we will now experience a deeper recession (10 coronavirus predictions).
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. Insider Monkey finished processing 835 13F filings submitted by hedge funds and prominent investors. These filings show these funds' portfolio positions as of December 31st, 2019. What do these smart investors think about Americold Realty Trust (NYSE:COLD)?
Americold Realty Trust (NYSE:COLD) was in 26 hedge funds' portfolios at the end of the fourth quarter of 2019. COLD has experienced a decrease in support from the world's most elite money managers in recent months. There were 31 hedge funds in our database with COLD holdings at the end of the previous quarter. Our calculations also showed that COLD isn't among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of this article for Q3 rankings).
Hedge funds' reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn't keep up with the unhedged returns of the market indices. 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 S&P 500 ETFs by 41 percentage points since March 2017 (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.
[caption id="attachment_365194" align="aligncenter" width="400"] David E. Shaw of D.E. Shaw[/caption]
We leave no stone unturned when looking for the next great investment idea. For example we recently identified a stock that trades 25% below the net cash on its balance sheet. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences, and go through short-term trade recommendations like this one. We even check out the recommendations of services with hard to believe track records. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic's significance before most investors. Keeping this in mind we're going to take a look at the fresh hedge fund action regarding Americold Realty Trust (NYSE:COLD).
How have hedgies been trading Americold Realty Trust (NYSE:COLD)?
Heading into the first quarter of 2020, a total of 26 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -16% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards COLD over the last 18 quarters. With hedge funds' capital changing hands, there exists a select group of key hedge fund managers who were adding to their stakes meaningfully (or already accumulated large positions).
Of the funds tracked by Insider Monkey, D E Shaw, managed by D. E. Shaw, holds the number one position in Americold Realty Trust (NYSE:COLD). D E Shaw has a $81.8 million position in the stock, comprising 0.1% of its 13F portfolio. Sitting at the No. 2 spot is Israel Englander of Millennium Management, with a $40.5 million position; the fund has 0.1% of its 13F portfolio invested in the stock. Remaining hedge funds and institutional investors that are bullish encompass Eduardo Abush's Waterfront Capital Partners, Steve Cohen's Point72 Asset Management and Dmitry Balyasny's Balyasny Asset Management. In terms of the portfolio weights assigned to each position SkyTop Capital Management allocated the biggest weight to Americold Realty Trust (NYSE:COLD), around 6.7% of its 13F portfolio. Waterfront Capital Partners is also relatively very bullish on the stock, dishing out 5.67 percent of its 13F equity portfolio to COLD.
Because Americold Realty Trust (NYSE:COLD) has experienced falling interest from the aggregate hedge fund industry, it's safe to say that there is a sect of money managers who were dropping their full holdings heading into Q4. At the top of the heap, Dan Loeb's Third Point dumped the largest stake of the 750 funds monitored by Insider Monkey, totaling close to $47.5 million in stock. Ken Heebner's fund, Capital Growth Management, also dumped its stock, about $36.7 million worth. These bearish behaviors are interesting, as total hedge fund interest was cut by 5 funds heading into Q4.
Let's now review hedge fund activity in other stocks similar to Americold Realty Trust (NYSE:COLD). These stocks are New Residential Investment Corp (NYSE:NRZ), Leggett & Platt, Inc. (NYSE:LEG), Grupo Aeroportuario del Pacifico (NYSE:PAC), and CDK Global Inc (NASDAQ:CDK). This group of stocks' market caps are similar to COLD's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position NRZ,23,129808,3 LEG,27,101609,15 PAC,7,144956,4 CDK,25,356570,-4 Average,20.5,183236,4.5 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 20.5 hedge funds with bullish positions and the average amount invested in these stocks was $183 million. That figure was $360 million in COLD's case. Leggett & Platt, Inc. (NYSE:LEG) is the most popular stock in this table. On the other hand Grupo Aeroportuario del Pacifico (NYSE:PAC) is the least popular one with only 7 bullish hedge fund positions. Americold Realty Trust (NYSE:COLD) 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 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks lost 22.3% in 2020 through March 16th but beat the market by 3.2 percentage points. Unfortunately COLD wasn't nearly as popular as these 20 stocks and hedge funds that were betting on COLD were disappointed as the stock returned -31.5% 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 many of these stocks already outperformed the market so far this year. Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.