The elite funds run by legendary investors such as David Tepper and Dan Loeb make hundreds of millions of dollars for themselves and their investors by spending enormous resources doing research on small cap stocks that big investment banks don’t follow. Because of their pay structures, they have strong incentives to do the research necessary to beat the market. That’s why we pay close attention to what they think in small cap stocks. In this article, we take a closer look at ASGN Incorporated (NYSE:ASGN) from the perspective of those elite funds.
Is ASGN Incorporated (NYSE:ASGN) a superb investment now? The best stock pickers are in a pessimistic mood at the margin. The number of long hedge fund positions were trimmed by 2 recently. Our calculations also showed that ASGN isn’t among the 30 most popular stocks among hedge funds (see the video below). However, overall hedge fund sentiment towards the stock is still pretty robust compared to its peers.
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 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.
Unlike former hedge manager, Dr. Steve Sjuggerud, who is convinced Dow will soar past 40000, our long-short investment strategy doesn’t rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. Let’s analyze the recent hedge fund action regarding ASGN Incorporated (NYSE:ASGN).
What have hedge funds been doing with ASGN Incorporated (NYSE:ASGN)?
Heading into the third quarter of 2019, a total of 21 of the hedge funds tracked by Insider Monkey were long this stock, a change of -9% from the previous quarter. By comparison, 14 hedge funds held shares or bullish call options in ASGN a year ago. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Select Equity Group held the most valuable stake in ASGN Incorporated (NYSE:ASGN), which was worth $43.6 million at the end of the second quarter. On the second spot was Citadel Investment Group which amassed $39.1 million worth of shares. Moreover, Millennium Management, Incline Global Management, and Marshall Wace LLP were also bullish on ASGN Incorporated (NYSE:ASGN), allocating a large percentage of their portfolios to this stock.
Because ASGN Incorporated (NYSE:ASGN) has experienced bearish sentiment from the entirety of the hedge funds we track, we can see that there is a sect of funds that slashed their positions entirely in the second quarter. It’s worth mentioning that Chuck Royce’s Royce & Associates dumped the largest investment of the 750 funds followed by Insider Monkey, valued at about $2.1 million in stock, and Dmitry Balyasny’s Balyasny Asset Management was right behind this move, as the fund said goodbye to about $1.3 million worth. These moves are intriguing to say the least, as aggregate hedge fund interest dropped by 2 funds in the second quarter.
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as ASGN Incorporated (NYSE:ASGN) but similarly valued. We will take a look at Commscope Holding Company Inc (NASDAQ:COMM), Sensient Technologies Corporation (NYSE:SXT), Cosan Limited (NYSE:CZZ), and Liberty Latin America Ltd. (NASDAQ:LILA). This group of stocks’ market values are similar to ASGN’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| COMM | 20 | 811446 | -3 |
| SXT | 12 | 52368 | 4 |
| CZZ | 15 | 174422 | -1 |
| LILA | 11 | 144973 | -3 |
| Average | 14.5 | 295802 | -0.75 |
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 $296 million. That figure was $207 million in ASGN’s case. Commscope Holding Company Inc (NASDAQ:COMM) is the most popular stock in this table. On the other hand Liberty Latin America Ltd. (NASDAQ:LILA) is the least popular one with only 11 bullish hedge fund positions. Compared to these stocks ASGN Incorporated (NYSE:ASGN) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Hedge funds were also right about betting on ASGN, though not to the same extent, as the stock returned 3.7% during the third quarter and outperformed the market as well.
Disclosure: None. This article was originally published at Insider Monkey.
