Coronavirus is probably the #1 concern in investors’ minds right now. It should be. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW. We predicted that a US recession is imminent and US stocks will go down by at least 20% in the next 3-6 months. We also told you to short the market ETFs and buy long-term bonds. Investors who agreed with us and replicated these trades are up double digits whereas the market is down double digits. Our article also called for a total international travel ban to prevent the spread of the coronavirus especially from Europe. We were one step ahead of the markets and the president (see why hell is coming).
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. How do you pick the next stock to invest in? One way would be to spend days of research browsing through thousands of publicly traded companies. However, an easier way is to look at the stocks that smart money investors are collectively bullish on. Hedge funds and other institutional investors usually invest large amounts of capital and have to conduct due diligence while choosing their next pick. They don’t always get it right, but, on average, their stock picks historically generated strong returns after adjusting for known risk factors. With this in mind, let’s take a look at the recent hedge fund activity surrounding Angie’s List Inc (NASDAQ:ANGI).
Angie’s List Inc (NASDAQ:ANGI) shares haven’t seen a lot of action during the fourth quarter. Overall, hedge fund sentiment was unchanged. The stock was in 23 hedge funds’ portfolios at the end of December. At the end of this article we will also compare ANGI to other stocks including Sterling Bancorp (NYSE:STL), Spire Inc. (NYSE:SR), and The Timken Company (NYSE:TKR) to get a better sense of its popularity.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by more than 41 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’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 35.3% through March 3rd. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Christian Leone of Luxor Capital Group
We leave no stone unturned when looking for the next great investment idea. For example we recently identified a stock that trades 25% below the net cash on its balance sheet. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences, and go through short-term trade recommendations like this one. We even check out the recommendations of services with hard to believe track records. Our best call in 2020 was shorting the market when 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 look at the latest hedge fund action surrounding Angie’s List Inc (NASDAQ:ANGI).
Hedge fund activity in Angie’s List Inc (NASDAQ:ANGI)
Heading into the first quarter of 2020, a total of 23 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 0% from one quarter earlier. By comparison, 22 hedge funds held shares or bullish call options in ANGI a year ago. With hedge funds’ positions undergoing their usual ebb and flow, there exists a few notable hedge fund managers who were adding to their holdings significantly (or already accumulated large positions).
The largest stake in Angie’s List Inc (NASDAQ:ANGI) was held by Luxor Capital Group, which reported holding $91.7 million worth of stock at the end of September. It was followed by Renaissance Technologies with a $45.3 million position. Other investors bullish on the company included Echo Street Capital Management, SQN Investors, and ShawSpring Partners. In terms of the portfolio weights assigned to each position ShawSpring Partners allocated the biggest weight to Angie’s List Inc (NASDAQ:ANGI), around 15.46% of its 13F portfolio. Atreides Management is also relatively very bullish on the stock, dishing out 3.66 percent of its 13F equity portfolio to ANGI.
Seeing as Angie’s List Inc (NASDAQ:ANGI) has witnessed declining sentiment from the entirety of the hedge funds we track, it’s easy to see that there lies a certain “tier” of money managers who sold off their entire stakes heading into Q4. At the top of the heap, Robert Henry Lynch’s Aristeia Capital sold off the largest investment of the “upper crust” of funds followed by Insider Monkey, worth about $11.9 million in stock. Jeff Lignelli’s fund, Incline Global Management, also said goodbye to its stock, about $7 million worth. These transactions are intriguing to say the least, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).
Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Angie’s List Inc (NASDAQ:ANGI) but similarly valued. These stocks are Sterling Bancorp (NYSE:STL), Spire Inc. (NYSE:SR), The Timken Company (NYSE:TKR), and Glacier Bancorp, Inc. (NASDAQ:GBCI). This group of stocks’ market valuations are closest to ANGI’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| STL | 30 | 337941 | 5 |
| SR | 12 | 55236 | -2 |
| TKR | 40 | 407847 | 11 |
| GBCI | 13 | 49723 | -1 |
| Average | 23.75 | 212687 | 3.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 23.75 hedge funds with bullish positions and the average amount invested in these stocks was $213 million. That figure was $387 million in ANGI’s case. The Timken Company (NYSE:TKR) is the most popular stock in this table. On the other hand Spire Inc. (NYSE:SR) is the least popular one with only 12 bullish hedge fund positions. Angie’s List Inc (NASDAQ:ANGI) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. 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 10.1 percentage points. These stocks lost 17.4% in 2020 through March 25th but beat the market by 5.5 percentage points. Unfortunately ANGI wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); ANGI investors were disappointed as the stock returned -44.5% during the same time period and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as most of these stocks already outperformed the market in Q1.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.
