Hedge Funds and other institutional investors have just completed filing their 13Fs with the Securities and Exchange Commission, revealing their equity portfolios as of the end of June. At Insider Monkey, we follow nearly 900 active hedge funds and notable investors and by analyzing their 13F filings, we can determine the stocks that they are collectively bullish on. One of their picks is Advantage Solutions Inc. (NASDAQ:ADV), so let’s take a closer look at the sentiment that surrounds it in the current quarter.
Advantage Solutions Inc. (NASDAQ:ADV) shares haven’t seen a lot of action during the second quarter. Overall, hedge fund sentiment was unchanged. The stock was in 24 hedge funds’ portfolios at the end of the second quarter of 2021. Our calculations also showed that ADV isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings). At the end of this article we will also compare ADV to other stocks including SSR Mining Inc. (NASDAQ:SSRM), Tronox Holdings Plc (NYSE:TROX), and Cassava Sciences, Inc. (NASDAQ:SAVA) to get a better sense of its popularity.
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 S&P 500 ETFs by more than 79 percentage points since March 2017 (see the details here). We have been able to outperform the passive index funds by tracking the moves of corporate insiders and hedge funds, and we believe small investors can benefit a lot from reading hedge fund investor letters and 13F filings.
Seth Klarman of Baupost Group
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. We go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. 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 homepage. With all of this in mind we’re going to take a look at the recent hedge fund action regarding Advantage Solutions Inc. (NASDAQ:ADV).
Do Hedge Funds Think ADV Is A Good Stock To Buy Now?
At Q2’s end, a total of 24 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 0% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards ADV over the last 24 quarters. With hedge funds’ capital changing hands, there exists a select group of notable hedge fund managers who were upping their stakes substantially (or already accumulated large positions).
More specifically, Leonard Green & Partners was the largest shareholder of Advantage Solutions Inc. (NASDAQ:ADV), with a stake worth $166.7 million reported as of the end of June. Trailing Leonard Green & Partners was Baupost Group, which amassed a stake valued at $129.6 million. Alyeska Investment Group, Prentice Capital Management, and Woodson Capital Management 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 Prentice Capital Management allocated the biggest weight to Advantage Solutions Inc. (NASDAQ:ADV), around 8.58% of its 13F portfolio. Woodson Capital Management is also relatively very bullish on the stock, earmarking 2.03 percent of its 13F equity portfolio to ADV.
Because Advantage Solutions Inc. (NASDAQ:ADV) has experienced falling interest from hedge fund managers, logic holds that there lies a certain “tier” of hedgies that decided to sell off their full holdings last quarter. At the top of the heap, Curtis Schenker and Craig Effron’s Scoggin said goodbye to the biggest investment of the 750 funds tracked by Insider Monkey, totaling an estimated $3.6 million in stock. Peter Rathjens, Bruce Clarke and John Campbell’s fund, Arrowstreet Capital, also said goodbye to its stock, about $2.5 million worth. These transactions 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 similar to Advantage Solutions Inc. (NASDAQ:ADV). These stocks are SSR Mining Inc. (NASDAQ:SSRM), Tronox Holdings Plc (NYSE:TROX), Cassava Sciences, Inc. (NASDAQ:SAVA), Cornerstone OnDemand, Inc. (NASDAQ:CSOD), Apple Hospitality REIT Inc (NYSE:APLE), Taylor Morrison Home Corp (NYSE:TMHC), and Bank of Hawaii Corporation (NYSE:BOH). This group of stocks’ market valuations resemble ADV’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| SSRM | 20 | 204712 | 4 |
| TROX | 36 | 353082 | 0 |
| SAVA | 13 | 52698 | 8 |
| CSOD | 25 | 818761 | -3 |
| APLE | 16 | 243697 | -1 |
| TMHC | 23 | 203010 | 1 |
| BOH | 15 | 42233 | 0 |
| Average | 21.1 | 274028 | 1.3 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 21.1 hedge funds with bullish positions and the average amount invested in these stocks was $274 million. That figure was $504 million in ADV’s case. Tronox Holdings Plc (NYSE:TROX) is the most popular stock in this table. On the other hand Cassava Sciences, Inc. (NASDAQ:SAVA) is the least popular one with only 13 bullish hedge fund positions. Advantage Solutions Inc. (NASDAQ:ADV) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for ADV is 58.9. 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 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 24% in 2021 through October 22nd and beat the market again by 1.6 percentage points. Unfortunately ADV wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on ADV were disappointed as the stock returned -23% since the end of June (through 10/22) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as many of these stocks already outperformed the market since 2019.
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Disclosure: None. This article was originally published at Insider Monkey.
