“Since 2006, value stocks (IVE vs IVW) have underperformed 11 of the 13 calendar years and when they beat growth, it wasn’t by much. Cumulatively, through this week, it has been a 122% differential (up 52% for value vs up 174% for growth). This appears to be the longest and most severe drought for value investors since data collection began. It will go our way eventually as there are too many people paying far too much for today’s darlings, both public and private. Further, the ten-year yield of 2.5% (pre-tax) isn’t attractive nor is real estate. We believe the value part of the global equity market is the only place to earn solid risk adjusted returns and we believe those returns will be higher than normal,” said Vilas Fund in its Q1 investor letter. We aren’t sure whether value stocks outperform growth, but we follow hedge fund investor letters to understand where the markets and stocks might be going. This article will lay out and discuss the hedge fund and institutional investor sentiment towards Ardmore Shipping Corp (NYSE:ASC).
Ardmore Shipping Corp (NYSE:ASC) investors should be aware of an increase in activity from the world’s largest hedge funds recently. ASC was in 14 hedge funds’ portfolios at the end of September. There were 10 hedge funds in our database with ASC positions at the end of the previous quarter. Our calculations also showed that ASC isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings).
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
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 Russell 2000 ETFs by 40 percentage points since May 2014 (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 stocks that are in our short portfolio.
Chuck Royce of Royce & Associates
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. One of the most bullish analysts in America just put his money where his mouth is. He says, “I’m investing more today than I did back in early 2009.” So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We also rely on the best performing hedge funds‘ buy/sell signals. We’re going to take a look at the fresh hedge fund action surrounding Ardmore Shipping Corp (NYSE:ASC).
How are hedge funds trading Ardmore Shipping Corp (NYSE:ASC)?
At Q3’s end, a total of 14 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 40% from one quarter earlier. On the other hand, there were a total of 7 hedge funds with a bullish position in ASC a year ago. With the smart money’s positions undergoing their usual ebb and flow, there exists an “upper tier” of key hedge fund managers who were upping their holdings considerably (or already accumulated large positions).
The largest stake in Ardmore Shipping Corp (NYSE:ASC) was held by Royce & Associates, which reported holding $9.8 million worth of stock at the end of September. It was followed by Renaissance Technologies with a $4.5 million position. Other investors bullish on the company included Portolan Capital Management, Marshall Wace, and GLG Partners. In terms of the portfolio weights assigned to each position GeoSphere Capital Management allocated the biggest weight to Ardmore Shipping Corp (NYSE:ASC), around 5.07% of its 13F portfolio. Portolan Capital Management is also relatively very bullish on the stock, designating 0.25 percent of its 13F equity portfolio to ASC.
Consequently, key money managers have jumped into Ardmore Shipping Corp (NYSE:ASC) headfirst. Point72 Asset Management, managed by Steve Cohen, assembled the biggest position in Ardmore Shipping Corp (NYSE:ASC). Point72 Asset Management had $0.8 million invested in the company at the end of the quarter. Israel Englander’s Millennium Management also initiated a $0.6 million position during the quarter. The following funds were also among the new ASC investors: John Overdeck and David Siegel’s Two Sigma Advisors, Jon Bauer’s Contrarian Capital, and Michael Gelband’s ExodusPoint Capital.
Let’s now take a look at hedge fund activity in other stocks similar to Ardmore Shipping Corp (NYSE:ASC). We will take a look at Cherry Hill Mortgage Investment Corp (NYSE:CHMI), Value Line, Inc. (NASDAQ:VALU), Great Panther Silver Ltd (NYSEAMEX:GPL), and Codorus Valley Bancorp, Inc. (NASDAQ:CVLY). This group of stocks’ market values are similar to ASC’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| CHMI | 9 | 18326 | 0 |
| VALU | 2 | 3257 | 0 |
| GPL | 5 | 3159 | 0 |
| CVLY | 5 | 17100 | 0 |
| Average | 5.25 | 10461 | 0 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 5.25 hedge funds with bullish positions and the average amount invested in these stocks was $10 million. That figure was $25 million in ASC’s case. Cherry Hill Mortgage Investment Corp (NYSE:CHMI) is the most popular stock in this table. On the other hand Value Line, Inc. (NASDAQ:VALU) is the least popular one with only 2 bullish hedge fund positions. Compared to these stocks Ardmore Shipping Corp (NYSE:ASC) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Hedge funds were also right about betting on ASC as the stock returned 19.4% during the first two months of Q4 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.
