Looking for stocks with high upside potential? Just follow the big players within the hedge fund industry. Why should you do so? Let’s take a brief look at what statistics have to say about hedge funds’ stock picking abilities to illustrate. The Standard and Poor’s 500 Index returned approximately 5.7% in the 12 months ending October 26 (including dividend payments). Conversely, hedge funds’ 30 preferred S&P 500 stocks (as of June 2014) generated a return of 15.1% during the same 12-month period, with 53% of these stock picks outperforming the broader market benchmark. Coincidence? It might happen to be so, but it is unlikely. Our research covering the last 18 years indicates that hedge funds’ stock picks generate superior risk-adjusted returns. That’s why we believe it is wise to check hedge fund activity before you invest your time or your savings on a stock like Acushnet Holdings Corp. (NYSE:GOLF).
Acushnet Holdings Corp. (NYSE:GOLF) investors should be aware of an increase in enthusiasm from smart money recently. GOLF was in 14 hedge funds’ portfolios at the end of September. There were 8 hedge funds in our database with GOLF holdings at the end of the previous quarter. Our calculations also showed that golf 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 18 percentage points since May 2014 through December 3, 2018 (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.
We’re going to view the key hedge fund action encompassing Acushnet Holdings Corp. (NYSE:GOLF).
How are hedge funds trading Acushnet Holdings Corp. (NYSE:GOLF)?
Heading into the fourth quarter of 2018, a total of 14 of the hedge funds tracked by Insider Monkey were long this stock, a change of 75% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards GOLF over the last 13 quarters. With hedgies’ sentiment swirling, there exists a few key hedge fund managers who were upping their holdings significantly (or already accumulated large positions).
Among these funds, Sensato Capital Management held the most valuable stake in Acushnet Holdings Corp. (NYSE:GOLF), which was worth $14.9 million at the end of the third quarter. On the second spot was Millennium Management which amassed $12.8 million worth of shares. Moreover, Shellback Capital, Renaissance Technologies, and Citadel Investment Group were also bullish on Acushnet Holdings Corp. (NYSE:GOLF), allocating a large percentage of their portfolios to this stock.
As one would reasonably expect, key money managers were leading the bulls’ herd. Renaissance Technologies, managed by Jim Simons, assembled the biggest position in Acushnet Holdings Corp. (NYSE:GOLF). Renaissance Technologies had $2.7 million invested in the company at the end of the quarter. Joel Greenblatt’s Gotham Asset Management also initiated a $0.8 million position during the quarter. The other funds with new positions in the stock are D. E. Shaw’s D E Shaw, Andrew Feldstein and Stephen Siderow’s Blue Mountain Capital, and Matthew Hulsizer’s PEAK6 Capital Management.
Let’s now review hedge fund activity in other stocks similar to Acushnet Holdings Corp. (NYSE:GOLF). These stocks are Allegiant Travel Company (NASDAQ:ALGT), DoubleLine Income Solutions Fund (NYSE:DSL), Spark Therapeutics Inc (NASDAQ:ONCE), and Appian Corporation (NASDAQ:APPN). This group of stocks’ market caps resemble GOLF’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| ALGT | 15 | 428697 | 0 |
| DSL | 2 | 17849 | 0 |
| ONCE | 21 | 341380 | 4 |
| APPN | 8 | 210557 | 4 |
| Average | 11.5 | 249621 | 2 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 11.5 hedge funds with bullish positions and the average amount invested in these stocks was $250 million. That figure was $39 million in GOLF’s case. Spark Therapeutics Inc (NASDAQ:ONCE) is the most popular stock in this table. On the other hand DoubleLine Income Solutions Fund (NYSE:DSL) is the least popular one with only 2 bullish hedge fund positions. Acushnet Holdings Corp. (NYSE:GOLF) 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. In this regard ONCE might be a better candidate to consider a long position.
Disclosure: None. This article was originally published at Insider Monkey.
