In this article we will check out the progression of hedge fund sentiment towards Adams Resources & Energy Inc (NYSE:AE) and determine whether it is a good investment right now. We at Insider Monkey like to examine what billionaires and hedge funds think of a company before spending days of research on it. Given their 2 and 20 payment structure, hedge funds have more incentives and resources than the average investor. The funds have access to expert networks and get tips from industry insiders. They also employ numerous Ivy League graduates and MBAs. Like everyone else, hedge funds perform miserably at times, but their consensus picks have historically outperformed the market after risk adjustments.
Is Adams Resources & Energy Inc (NYSE:AE) undervalued? Investors who are in the know are turning less bullish. The number of bullish hedge fund bets decreased by 2 lately. Our calculations also showed that AE 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). AE was in 4 hedge funds’ portfolios at the end of the first quarter of 2020. There were 6 hedge funds in our database with AE positions at the end of the previous quarter.
Video: Watch our video about the top 5 most popular hedge fund stocks.
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s monthly stock picks returned 87% since March 2017 and outperformed the S&P 500 ETFs by more than 51 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
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At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, 2020’s unprecedented market conditions provide us with the highest number of trading opportunities in a decade. So we are checking out stocks recommended/scorned by legendary Bill Miller. 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. With all of this in mind we’re going to take a gander at the recent hedge fund action regarding Adams Resources & Energy Inc (NYSE:AE).
Hedge fund activity in Adams Resources & Energy Inc (NYSE:AE)
At Q1’s end, a total of 4 of the hedge funds tracked by Insider Monkey were long this stock, a change of -33% from one quarter earlier. On the other hand, there were a total of 3 hedge funds with a bullish position in AE a year ago. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Of the funds tracked by Insider Monkey, Renaissance Technologies, holds the number one position in Adams Resources & Energy Inc (NYSE:AE). Renaissance Technologies has a $7.1 million position in the stock, comprising less than 0.1%% of its 13F portfolio. Coming in second is Frederick DiSanto of Ancora Advisors, with a $1.6 million position; the fund has 0.1% of its 13F portfolio invested in the stock. Other professional money managers that are bullish encompass David P. Cohen’s Minerva Advisors, Israel Englander’s Millennium Management and . In terms of the portfolio weights assigned to each position Minerva Advisors allocated the biggest weight to Adams Resources & Energy Inc (NYSE:AE), around 0.59% of its 13F portfolio. Ancora Advisors is also relatively very bullish on the stock, dishing out 0.07 percent of its 13F equity portfolio to AE.
Since Adams Resources & Energy Inc (NYSE:AE) has faced bearish sentiment from the entirety of the hedge funds we track, logic holds that there were a few funds that elected to cut their full holdings in the third quarter. At the top of the heap, Michael Gelband’s ExodusPoint Capital dumped the biggest stake of all the hedgies watched by Insider Monkey, totaling about $0.3 million in stock, and David Nguyen and Nancy Oh’s One68 Global Capital was right behind this move, as the fund cut about $0.2 million worth. These moves are interesting, as aggregate hedge fund interest was cut by 2 funds in the third quarter.
Let’s also examine hedge fund activity in other stocks similar to Adams Resources & Energy Inc (NYSE:AE). These stocks are PowerFleet, Inc. (NASDAQ:PWFL), InflaRx N.V. (NASDAQ:IFRX), Danaos Corporation (NYSE:DAC), and GlycoMimetics, Inc. (NASDAQ:GLYC). This group of stocks’ market valuations resemble AE’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| PWFL | 12 | 21319 | -3 |
| IFRX | 9 | 15958 | 3 |
| DAC | 6 | 8980 | 0 |
| GLYC | 13 | 28346 | 1 |
| Average | 10 | 18651 | 0.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 10 hedge funds with bullish positions and the average amount invested in these stocks was $19 million. That figure was $10 million in AE’s case. GlycoMimetics, Inc. (NASDAQ:GLYC) is the most popular stock in this table. On the other hand Danaos Corporation (NYSE:DAC) is the least popular one with only 6 bullish hedge fund positions. Compared to these stocks Adams Resources & Energy Inc (NYSE:AE) is even less popular than DAC. Hedge funds dodged a bullet by taking a bearish stance towards AE. Our calculations showed that the top 10 most popular hedge fund stocks returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 8.3% in 2020 through the end of May but managed to beat the market by 13.2 percentage points. Unfortunately AE wasn’t nearly as popular as these 10 stocks (hedge fund sentiment was very bearish); AE investors were disappointed as the stock returned 11.6% during the second quarter (through the end of May) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as most of these stocks already outperformed the market so far in 2020.
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Disclosure: None. This article was originally published at Insider Monkey.
