Hedge Funds Cashing Out Of Asbury Automotive Group, Inc. (ABG)

The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We at Insider Monkey have plowed through 821 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds’ and investors’ portfolio positions as of March 31st, a week after the market trough. In this article we look at what those investors think of Asbury Automotive Group, Inc. (NYSE:ABG).

Is Asbury Automotive Group, Inc. (NYSE:ABG) the right investment to pursue these days? Investors who are in the know are in a bearish mood. The number of bullish hedge fund positions decreased by 5 lately. Our calculations also showed that ABG isn’t among the 30 most popular stocks among hedge funds (click for Q1 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 58 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.

David Abrams of Abrams Capital Management

We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world’s largest cannabis market, so we check out this European marijuana stock pitch. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind let’s take a look at the key hedge fund action encompassing Asbury Automotive Group, Inc. (NYSE:ABG).

Hedge fund activity in Asbury Automotive Group, Inc. (NYSE:ABG)

At the end of the first quarter, a total of 19 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -21% from the previous quarter. The graph below displays the number of hedge funds with bullish position in ABG over the last 18 quarters. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Among these funds, Abrams Capital Management held the most valuable stake in Asbury Automotive Group, Inc. (NYSE:ABG), which was worth $117 million at the end of the third quarter. On the second spot was Eminence Capital which amassed $45.7 million worth of shares. Impactive Capital, Arrowstreet Capital, 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 Impactive Capital allocated the biggest weight to Asbury Automotive Group, Inc. (NYSE:ABG), around 14.3% of its 13F portfolio. Abrams Capital Management is also relatively very bullish on the stock, setting aside 4.6 percent of its 13F equity portfolio to ABG.

Due to the fact that Asbury Automotive Group, Inc. (NYSE:ABG) has witnessed declining sentiment from the aggregate hedge fund industry, we can see that there lies a certain “tier” of funds that elected to cut their full holdings in the first quarter. Interestingly, Brandon Haley’s Holocene Advisors dropped the largest investment of the “upper crust” of funds monitored by Insider Monkey, totaling an estimated $2 million in stock, and Renaissance Technologies was right behind this move, as the fund cut about $1.4 million worth. These transactions are important to note, as total hedge fund interest dropped by 5 funds in the first quarter.

Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Asbury Automotive Group, Inc. (NYSE:ABG) but similarly valued. These stocks are Heron Therapeutics Inc (NASDAQ:HRTX), Marcus & Millichap Inc (NYSE:MMI), Viper Energy Partners LP (NASDAQ:VNOM), and Pretium Resources Inc (NYSE:PVG). This group of stocks’ market caps resemble ABG’s market cap.

View table here if you experience formatting issues.

As you can see these stocks had an average of 16 hedge funds with bullish positions and the average amount invested in these stocks was $101 million. That figure was $249 million in ABG’s case. Pretium Resources Inc (NYSE:PVG) is the most popular stock in this table. On the other hand Marcus & Millichap Inc (NYSE:MMI) is the least popular one with only 9 bullish hedge fund positions. Asbury Automotive Group, Inc. (NYSE:ABG) is not the most popular stock in this group but hedge fund interest is still above average. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 13.4% in 2020 through June 22nd but still beat the market by 15.9 percentage points. Hedge funds were also right about betting on ABG as the stock returned 37.4% in Q2 (through June 22nd) and outperformed the market. Hedge funds were rewarded for their relative bullishness.

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