Hedge Funds Are Dumping Aspen Aerogels Inc (ASPN)

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 September. At Insider Monkey, we follow nearly 817 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 Aspen Aerogels Inc (NYSE:ASPN), so let’s take a closer look at the sentiment that surrounds it in the current quarter.

Aspen Aerogels Inc (NYSE:ASPN) was in 5 hedge funds’ portfolios at the end of September. The all time high for this statistics is 10. ASPN has seen a decrease in enthusiasm from smart money of late. There were 7 hedge funds in our database with ASPN holdings at the end of June. Our calculations also showed that ASPN 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).

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.

Gavin Saitowitz of Prelude Capital

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 take a look at the latest hedge fund action encompassing Aspen Aerogels Inc (NYSE:ASPN).

What have hedge funds been doing with Aspen Aerogels Inc (NYSE:ASPN)?

At third quarter’s end, a total of 5 of the hedge funds tracked by Insider Monkey were long this stock, a change of -29% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards ASPN over the last 21 quarters. With hedgies’ capital changing hands, there exists a few noteworthy hedge fund managers who were boosting their holdings significantly (or already accumulated large positions).

Among these funds, Renaissance Technologies held the most valuable stake in Aspen Aerogels Inc (NYSE:ASPN), which was worth $6.8 million at the end of the third quarter. On the second spot was Royce & Associates which amassed $6.5 million worth of shares. Harvey Partners, Two Sigma Advisors, and Prelude Capital (previously Springbok Capital) 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 Harvey Partners allocated the biggest weight to Aspen Aerogels Inc (NYSE:ASPN), around 5.95% of its 13F portfolio. Royce & Associates is also relatively very bullish on the stock, designating 0.07 percent of its 13F equity portfolio to ASPN.

Judging by the fact that Aspen Aerogels Inc (NYSE:ASPN) has witnessed a decline in interest from the entirety of the hedge funds we track, it’s safe to say that there was a specific group of hedgies that slashed their full holdings last quarter. Interestingly, Richard Driehaus’s Driehaus Capital dropped the biggest position of the 750 funds watched by Insider Monkey, worth about $2.8 million in stock, and Josh Goldberg’s G2 Investment Partners Management was right behind this move, as the fund cut about $1 million worth. These bearish behaviors are intriguing to say the least, as total hedge fund interest dropped by 2 funds last quarter.

Let’s now take a look at hedge fund activity in other stocks similar to Aspen Aerogels Inc (NYSE:ASPN). We will take a look at Lydall, Inc. (NYSE:LDL), CRA International, Inc. (NASDAQ:CRAI), Canaan Inc. (NASDAQ:CAN), Mercantile Bank Corp. (NASDAQ:MBWM), Ooma Inc (NYSE:OOMA), Concert Pharmaceuticals Inc (NASDAQ:CNCE), and Urovant Sciences Ltd. (NASDAQ:UROV). This group of stocks’ market values are closest to ASPN’s market value.

View table here if you experience formatting issues.

As you can see these stocks had an average of 10.3 hedge funds with bullish positions and the average amount invested in these stocks was $43 million. That figure was $18 million in ASPN’s case. Concert Pharmaceuticals Inc (NASDAQ:CNCE) is the most popular stock in this table. On the other hand Canaan Inc. (NASDAQ:CAN) is the least popular one with only 5 bullish hedge fund positions. Compared to these stocks Aspen Aerogels Inc (NYSE:ASPN) is even less popular than CAN. Our overall hedge fund sentiment score for ASPN is 18. 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. Hedge funds clearly dropped the ball on ASPN as the stock delivered strong returns, though hedge funds’ consensus picks still generated respectable returns. 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 30.7% in 2020 through November 27th and still beat the market by 16.1 percentage points. A small number of hedge funds were also right about betting on ASPN as the stock returned 36.3% since Q3 (through November 27th) and outperformed the market by an even larger margin.

Disclosure: None. This article was originally published at Insider Monkey.