Hedge funds and large money managers usually invest with a focus on the long-term horizon and, therefore, short-lived dips or bumps on the charts usually don’t make them change their opinion towards a company. This time it may be different. The coronavirus pandemic destroyed the high correlations among major industries and asset classes. We are now in a stock pickers market where fundamentals of a stock have more effect on the price than the overall direction of the market. As a result we observe sudden and large changes in hedge fund positions depending on the news flow. Let’s take a look at the hedge fund sentiment towards Ares Management Corp (NYSE:ARES) to find out whether there were any major changes in hedge funds’ views.
Is Ares Management Corp (NYSE:ARES) a buy here? Investors who are in the know were buying. The number of bullish hedge fund positions rose by 2 recently. Ares Management Corp (NYSE:ARES) was in 22 hedge funds’ portfolios at the end of the third quarter of 2021. The all time high for this statistic was previously 20. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that ARES isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings). There were 20 hedge funds in our database with ARES holdings at the end of June.
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium prices have more than doubled over the past year, so 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. With all of this in mind we’re going to check out the latest hedge fund action surrounding Ares Management Corp (NYSE:ARES).
Peter Algert of Algert Global
Do Hedge Funds Think ARES Is A Good Stock To Buy Now?
At the end of September, a total of 22 of the hedge funds tracked by Insider Monkey were long this stock, a change of 10% from the previous quarter. The graph below displays the number of hedge funds with bullish position in ARES over the last 25 quarters. With the smart money’s sentiment swirling, there exists an “upper tier” of noteworthy hedge fund managers who were upping their stakes meaningfully (or already accumulated large positions).
Among these funds, HMI Capital held the most valuable stake in Ares Management Corp (NYSE:ARES), which was worth $423.8 million at the end of the third quarter. On the second spot was Junto Capital Management which amassed $74.7 million worth of shares. Royce & Associates, Millennium Management, and Holocene Advisors 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 HMI Capital allocated the biggest weight to Ares Management Corp (NYSE:ARES), around 12.71% of its 13F portfolio. Becker Drapkin Management is also relatively very bullish on the stock, dishing out 2.75 percent of its 13F equity portfolio to ARES.
As one would reasonably expect, some big names have been driving this bullishness. Engineers Gate Manager, managed by Greg Eisner, assembled the biggest position in Ares Management Corp (NYSE:ARES). Engineers Gate Manager had $3.3 million invested in the company at the end of the quarter. Jinghua Yan’s TwinBeech Capital also made a $2.4 million investment in the stock during the quarter. The following funds were also among the new ARES investors: Ray Dalio’s Bridgewater Associates, Peter Algert’s Algert Global, and Donald Sussman’s Paloma Partners.
Let’s also examine hedge fund activity in other stocks similar to Ares Management Corp (NYSE:ARES). These stocks are Pentair plc (NYSE:PNR), NovoCure Limited (NASDAQ:NVCR), Freshworks Inc. (NASDAQ:FRSH), CF Industries Holdings, Inc. (NYSE:CF), F5, Inc. (NASDAQ:FFIV), Medical Properties Trust, Inc. (NYSE:MPW), and Sasol Limited (NYSE:SSL). This group of stocks’ market caps are similar to ARES’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| PNR | 24 | 844523 | -1 |
| NVCR | 23 | 241286 | -2 |
| FRSH | 41 | 316230 | 41 |
| CF | 49 | 1272709 | 2 |
| FFIV | 27 | 686095 | -3 |
| MPW | 18 | 365527 | -1 |
| SSL | 4 | 76164 | -1 |
| Average | 26.6 | 543219 | 5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 26.6 hedge funds with bullish positions and the average amount invested in these stocks was $543 million. That figure was $728 million in ARES’s case. CF Industries Holdings, Inc. (NYSE:CF) is the most popular stock in this table. On the other hand Sasol Limited (NYSE:SSL) is the least popular one with only 4 bullish hedge fund positions. Ares Management Corp (NYSE:ARES) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for ARES is 57. 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. 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 29.6% in 2021 and still beat the market by 3.6 percentage points. A small number of hedge funds were also right about betting on ARES as the stock returned 10.7% since the end of the third quarter (through 12/31) and outperformed the market by an even larger margin.
Follow Ares Management Corp (NYSE:ARES)
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Disclosure: None. This article was originally published at Insider Monkey.
