We hate to say this but, we told you so. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW and predicted a US recession when the S&P 500 Index was trading at the 3150 level. We also told you to short the market and buy long-term Treasury bonds. Our article also called for a total international travel ban. While we were warning you, President Trump minimized the threat and failed to act promptly. As a result of his inaction, we will now experience a deeper recession (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. Although the masses and most of the financial media blame hedge funds for their exorbitant fee structure and disappointing performance, these investors have proved to have great stock picking abilities over the years (that’s why their assets under management continue to swell). We believe hedge fund sentiment should serve as a crucial tool of an individual investor’s stock selection process, as it may offer great insights of how the brightest minds of the finance industry feel about specific stocks. After all, these people have access to smartest analysts and expensive data/information sources that individual investors can’t match. So should one consider investing in Associated Banc Corp (NYSE:ASB)? The smart money sentiment can provide an answer to this question.
Associated Banc Corp (NYSE:ASB) was in 24 hedge funds’ portfolios at the end of December. ASB has seen an increase in enthusiasm from smart money lately. There were 23 hedge funds in our database with ASB positions at the end of the previous quarter. Our calculations also showed that ASB isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of this article for Q3 rankings).
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.
Richard S. Pzena of Pzena Investment Management
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. Now we’re going to analyze the key hedge fund action regarding Associated Banc Corp (NYSE:ASB).
Hedge fund activity in Associated Banc Corp (NYSE:ASB)
At the end of the fourth quarter, a total of 24 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 4% from the third quarter of 2019. Below, you can check out the change in hedge fund sentiment towards ASB over the last 18 quarters. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Associated Banc Corp (NYSE:ASB) was held by Pzena Investment Management, which reported holding $57.7 million worth of stock at the end of September. It was followed by AQR Capital Management with a $36.2 million position. Other investors bullish on the company included Citadel Investment Group, Millennium Management, and Royce & Associates. In terms of the portfolio weights assigned to each position Pzena Investment Management allocated the biggest weight to Associated Banc Corp (NYSE:ASB), around 0.27% of its 13F portfolio. Weld Capital Management is also relatively very bullish on the stock, designating 0.23 percent of its 13F equity portfolio to ASB.
With a general bullishness amongst the heavyweights, specific money managers were leading the bulls’ herd. Voleon Capital, managed by Michael Kharitonov and Jon David McAuliffe, established the most outsized position in Associated Banc Corp (NYSE:ASB). Voleon Capital had $1.3 million invested in the company at the end of the quarter. Ray Dalio’s Bridgewater Associates also initiated a $0.7 million position during the quarter. The other funds with brand new ASB positions are Peter Muller’s PDT Partners, Paul Tudor Jones’s Tudor Investment Corp, and Michael Gelband’s ExodusPoint Capital.
Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Associated Banc Corp (NYSE:ASB) but similarly valued. We will take a look at Qurate Retail, Inc. (NASDAQ:QRTEA), Liberty Global PLC LiLAC Class A (NASDAQ:LILA), Compania Cervecerias Unidas S.A. (NYSE:CCU), and Regal Beloit Corporation (NYSE:RBC). All of these stocks’ market caps are similar to ASB’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| QRTEA | 39 | 710121 | 4 |
| LILA | 11 | 170779 | -3 |
| CCU | 8 | 40468 | -1 |
| RBC | 24 | 281179 | 4 |
| Average | 20.5 | 300637 | 1 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 20.5 hedge funds with bullish positions and the average amount invested in these stocks was $301 million. That figure was $192 million in ASB’s case. Qurate Retail, Inc. (NASDAQ:QRTEA) is the most popular stock in this table. On the other hand Compania Cervecerias Unidas S.A. (NYSE:CCU) is the least popular one with only 8 bullish hedge fund positions. Associated Banc Corp (NYSE:ASB) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but 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 ASB wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on ASB were disappointed as the stock returned -45.2% 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 many of these stocks already outperformed the market so far this year.
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.
