How do we determine whether The Andersons, Inc. (NASDAQ:ANDE) makes for a good investment at the moment? We analyze the sentiment of a select group of the very best investors in the world, who spend immense amounts of time and resources studying companies. They may not always be right (no one is), but data shows that their consensus long positions have historically outperformed the market when we adjust for known risk factors.
Is The Andersons, Inc. (NASDAQ:ANDE) going to take off soon? Prominent investors are becoming hopeful. The number of long hedge fund bets moved up by 9 in recent months. Our calculations also showed that ANDE 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.
Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. 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.
Jonathan Barrett of Luminus Management
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. Let’s take a peek at the new hedge fund action regarding The Andersons, Inc. (NASDAQ:ANDE).
What does smart money think about The Andersons, Inc. (NASDAQ:ANDE)?
At Q3’s end, a total of 14 of the hedge funds tracked by Insider Monkey were long this stock, a change of 180% from the second quarter of 2019. The graph below displays the number of hedge funds with bullish position in ANDE over the last 17 quarters. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Luminus Management held the most valuable stake in The Andersons, Inc. (NASDAQ:ANDE), which was worth $21.9 million at the end of the third quarter. On the second spot was Renaissance Technologies which amassed $9.7 million worth of shares. Rutabaga Capital Management, Laurion Capital Management, and Marshall Wace were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Rutabaga Capital Management allocated the biggest weight to The Andersons, Inc. (NASDAQ:ANDE), around 2.46% of its 13F portfolio. Luminus Management is also relatively very bullish on the stock, setting aside 0.63 percent of its 13F equity portfolio to ANDE.
Now, key hedge funds have been driving this bullishness. Luminus Management, managed by Jonathan Barrett and Paul Segal, initiated the largest position in The Andersons, Inc. (NASDAQ:ANDE). Luminus Management had $21.9 million invested in the company at the end of the quarter. Benjamin A. Smith’s Laurion Capital Management also initiated a $4.5 million position during the quarter. The other funds with brand new ANDE positions are Paul Marshall and Ian Wace’s Marshall Wace, Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital, and Ken Griffin’s Citadel Investment Group.
Let’s go over hedge fund activity in other stocks similar to The Andersons, Inc. (NASDAQ:ANDE). We will take a look at Photronics, Inc. (NASDAQ:PLAB), CrossFirst Bankshares, Inc. (NASDAQ:CFB), Sturm, Ruger & Company, Inc. (NYSE:RGR), and Oaktree Specialty Lending Corporation (NASDAQ:OCSL). This group of stocks’ market caps are closest to ANDE’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| PLAB | 18 | 89460 | 1 |
| CFB | 6 | 20314 | 6 |
| RGR | 16 | 88127 | 3 |
| OCSL | 18 | 74388 | 1 |
| Average | 14.5 | 68072 | 2.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 14.5 hedge funds with bullish positions and the average amount invested in these stocks was $68 million. That figure was $53 million in ANDE’s case. Photronics, Inc. (NASDAQ:PLAB) is the most popular stock in this table. On the other hand CrossFirst Bankshares, Inc. (NASDAQ:CFB) is the least popular one with only 6 bullish hedge fund positions. The Andersons, Inc. (NASDAQ:ANDE) 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 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately ANDE wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); ANDE investors were disappointed as the stock returned 3% during the first two months of the fourth quarter 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 70 percent of these stocks already outperformed the market in Q4.
Disclosure: None. This article was originally published at Insider Monkey.
