Billionaire hedge fund managers such as David Abrams, Steve Cohen and Stan Druckenmiller can generate millions or even billions of dollars every year by pinning down high-potential small-cap stocks and pouring cash into these candidates. Small-cap stocks are overlooked by most investors, brokerage houses, and financial services hubs, while the unlimited research abilities of the big players within the hedge fund industry can easily identify the undervalued and high-potential stocks that reside the ignored corners of equity markets. There are numerous small-cap stocks that have turned out to be great winners, which is one of the main reasons the Insider Monkey team pays close attention to the hedge fund activity in relation to these stocks.
Americold Realty Trust (NYSE:COLD) shareholders have witnessed an increase in hedge fund interest in recent months. COLD was in 27 hedge funds’ portfolios at the end of the first quarter of 2019. There were 16 hedge funds in our database with COLD positions at the end of the previous quarter. Our calculations also showed that COLD isn’t among the 30 most popular stocks among hedge funds.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? 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 market by 40 percentage points since May 2014 through May 30, 2019 (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. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in our short portfolio.
Let’s take a look at the key hedge fund action surrounding Americold Realty Trust (NYSE:COLD).
How have hedgies been trading Americold Realty Trust (NYSE:COLD)?
At Q1’s end, a total of 27 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 69% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in COLD over the last 15 quarters. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
According to Insider Monkey’s hedge fund database, Senator Investment Group, managed by Doug Silverman and Alexander Klabin, holds the biggest position in Americold Realty Trust (NYSE:COLD). Senator Investment Group has a $228.8 million position in the stock, comprising 5.2% of its 13F portfolio. The second largest stake is held by Zimmer Partners, led by Stuart J. Zimmer, holding a $126.5 million position; 1.5% of its 13F portfolio is allocated to the stock. Other members of the smart money with similar optimism contain Ken Griffin’s Citadel Investment Group, Jeffrey Furber’s AEW Capital Management and Jim Simons’s Renaissance Technologies.
With a general bullishness amongst the heavyweights, key hedge funds have jumped into Americold Realty Trust (NYSE:COLD) headfirst. Marshall Wace LLP, managed by Paul Marshall and Ian Wace, assembled the most valuable position in Americold Realty Trust (NYSE:COLD). Marshall Wace LLP had $36.5 million invested in the company at the end of the quarter. John Khoury’s Long Pond Capital also made a $30.5 million investment in the stock during the quarter. The following funds were also among the new COLD investors: Ken Heebner’s Capital Growth Management, Jeffrey Talpins’s Element Capital Management, and Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital.
Let’s now take a look at hedge fund activity in other stocks similar to Americold Realty Trust (NYSE:COLD). These stocks are Life Storage, Inc. (NYSE:LSI), MAXIMUS, Inc. (NYSE:MMS), CACI International Inc (NYSE:CACI), and LendingTree, Inc (NASDAQ:TREE). This group of stocks’ market caps are closest to COLD’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| LSI | 15 | 274431 | 2 |
| MMS | 20 | 288188 | -2 |
| CACI | 13 | 132826 | -5 |
| TREE | 17 | 82935 | -4 |
| Average | 16.25 | 194595 | -2.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 16.25 hedge funds with bullish positions and the average amount invested in these stocks was $195 million. That figure was $908 million in COLD’s case. MAXIMUS, Inc. (NYSE:MMS) is the most popular stock in this table. On the other hand CACI International Inc (NYSE:CACI) is the least popular one with only 13 bullish hedge fund positions. Compared to these stocks Americold Realty Trust (NYSE:COLD) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 1.9% in Q2 through May 30th and outperformed the S&P 500 ETF (SPY) by more than 3 percentage points. Hedge funds were also right about betting on COLD as the stock returned 2.9% during the same period and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.
Disclosure: None. This article was originally published at Insider Monkey.
