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While the market driven by short-term sentiment influenced by the accomodative interest rate environment in the US, virus news and stimulus talks, many smart money investors are starting to get cautious towards the current bull run since March and hedging or reducing many of their long positions. Some fund managers are betting on Dow hitting 30,000 to generate strong returns. However, as we know, big investors usually buy stocks with strong fundamentals that can deliver gains both in bull and bear markets, which is why we believe we can profit from imitating them. In this article, we are going to take a look at the smart money sentiment surrounding Ardmore Shipping Corp (NYSE:ASC).
Ardmore Shipping Corp (NYSE:ASC) shares haven't seen a lot of action during the second quarter. Overall, hedge fund sentiment was unchanged. The stock was in 12 hedge funds' portfolios at the end of September. Our calculations also showed that ASC 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 ASC to other stocks including Catabasis Pharmaceuticals Inc (NASDAQ:CATB), LEAP THERAPEUTICS, INC. (NASDAQ:LPTX), and First Guaranty Bancshares, Inc. (NASDAQ:FGBI) to get a better sense of its popularity.
Video: Watch our video about the top 5 most popular hedge fund stocks.
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 66 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.
Noam Gottesman of GLG Partners
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. With all of this in mind let's analyze the new hedge fund action surrounding Ardmore Shipping Corp (NYSE:ASC).
Do Hedge Funds Think ASC Is A Good Stock To Buy Now?
At third quarter's end, a total of 12 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 0% from one quarter earlier. By comparison, 14 hedge funds held shares or bullish call options in ASC a year ago. So, let's review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Oaktree Capital Management was the largest shareholder of Ardmore Shipping Corp (NYSE:ASC), with a stake worth $5.7 million reported as of the end of September. Trailing Oaktree Capital Management was Royce & Associates, which amassed a stake valued at $2.3 million. Renaissance Technologies, Marshall Wace LLP, and GLG Partners were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Oaktree Capital Management allocated the biggest weight to Ardmore Shipping Corp (NYSE:ASC), around 0.12% of its 13F portfolio. Algert Coldiron Investors is also relatively very bullish on the stock, setting aside 0.05 percent of its 13F equity portfolio to ASC.
Seeing as Ardmore Shipping Corp (NYSE:ASC) has experienced a decline in interest from the smart money, it's safe to say that there is a sect of money managers that decided to sell off their entire stakes by the end of the third quarter. Interestingly, Greg Eisner's Engineers Gate Manager dropped the largest stake of all the hedgies monitored by Insider Monkey, valued at an estimated $0.2 million in stock. Donald Sussman's fund, Paloma Partners, also dropped 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 now take a look at hedge fund activity in other stocks - not necessarily in the same industry as Ardmore Shipping Corp (NYSE:ASC) but similarly valued. We will take a look at Catabasis Pharmaceuticals Inc (NASDAQ:CATB), LEAP THERAPEUTICS, INC. (NASDAQ:LPTX), First Guaranty Bancshares, Inc. (NASDAQ:FGBI), Champions Oncology, Inc. (NASDAQ:CSBR), Laredo Petroleum Inc (NYSE:LPI), Genocea Biosciences Inc (NASDAQ:GNCA), and Kopin Corporation (NASDAQ:KOPN). This group of stocks' market values are closest to ASC's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position CATB,6,3401,-2 LPTX,12,34432,-4 FGBI,1,328,-1 CSBR,2,2533,1 LPI,10,9238,-1 GNCA,10,28497,0 KOPN,2,2588,-1 Average,6.1,11574,-1.1 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 6.1 hedge funds with bullish positions and the average amount invested in these stocks was $12 million. That figure was $13 million in ASC's case. LEAP THERAPEUTICS, INC. (NASDAQ:LPTX) is the most popular stock in this table. On the other hand First Guaranty Bancshares, Inc. (NASDAQ:FGBI) is the least popular one with only 1 bullish hedge fund positions. Ardmore Shipping Corp (NYSE:ASC) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for ASC is 80.7. 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. 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 percentage points. These stocks gained 32.9% in 2020 through December 8th and beat the market again by 16.2 percentage points. Unfortunately ASC wasn't nearly as popular as these 20 stocks and hedge funds that were betting on ASC were disappointed as the stock returned -7% since the end of September (through 12/8) 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.
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Disclosure: None. This article was originally published at Insider Monkey.