Hedge fund managers like David Einhorn, Bill Ackman, or Carl Icahn became billionaires through reaping large profits for their investors, which is why piggybacking their stock picks may provide us with significant returns as well. Many hedge funds, like Paul Singer’s Elliott Management, are pretty secretive, but we can still get some insights by analyzing their quarterly 13F filings. One of the most fertile grounds for large abnormal returns is hedge funds’ most popular small-cap picks, which are not so widely followed and often trade at a discount to their intrinsic value. In this article we will check out hedge fund activity in another small-cap stock: The Andersons, Inc. (NASDAQ:ANDE).
The Andersons, Inc. (NASDAQ:ANDE) was in 5 hedge funds’ portfolios at the end of the second quarter of 2019. ANDE investors should be aware of a decrease in hedge fund interest lately. There were 8 hedge funds in our database with ANDE positions at the end of the previous quarter. Our calculations also showed that ANDE isn’t among the 30 most popular stocks among hedge funds (see the video below).
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that hedge funds’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were 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’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 25.7% through September 30, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
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 take a look at the new hedge fund action regarding The Andersons, Inc. (NASDAQ:ANDE).
What have hedge funds been doing with The Andersons, Inc. (NASDAQ:ANDE)?
Heading into the third quarter of 2019, a total of 5 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -38% from the first quarter of 2019. Below, you can check out the change in hedge fund sentiment towards ANDE over the last 16 quarters. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Renaissance Technologies was the largest shareholder of The Andersons, Inc. (NASDAQ:ANDE), with a stake worth $19.5 million reported as of the end of March. Trailing Renaissance Technologies was Rutabaga Capital Management, which amassed a stake valued at $10 million. Millennium Management, D E Shaw, and Fondren Management were also very fond of the stock, giving the stock large weights in their portfolios.
Since The Andersons, Inc. (NASDAQ:ANDE) has experienced a decline in interest from hedge fund managers, we can see that there were a few fund managers that elected to cut their full holdings last quarter. It’s worth mentioning that Paul Marshall and Ian Wace’s Marshall Wace LLP dropped the biggest position of the “upper crust” of funds tracked by Insider Monkey, worth about $0.5 million in stock, and John Overdeck and David Siegel’s Two Sigma Advisors was right behind this move, as the fund sold off about $0.3 million worth. These transactions are interesting, as aggregate hedge fund interest was cut by 3 funds last quarter.
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as The Andersons, Inc. (NASDAQ:ANDE) but similarly valued. We will take a look at Solar Capital Ltd. (NASDAQ:SLRC), Yiren Digital Ltd. (NYSE:YRD), Chatham Lodging Trust (NYSE:CLDT), and FARO Technologies, Inc. (NASDAQ:FARO). This group of stocks’ market values match ANDE’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| SLRC | 12 | 59440 | 1 |
| YRD | 3 | 6214 | 0 |
| CLDT | 8 | 53463 | 1 |
| FARO | 7 | 45598 | 0 |
| Average | 7.5 | 41179 | 0.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 7.5 hedge funds with bullish positions and the average amount invested in these stocks was $41 million. That figure was $38 million in ANDE’s case. Solar Capital Ltd. (NASDAQ:SLRC) is the most popular stock in this table. On the other hand Yiren Digital Ltd. (NYSE:YRD) is the least popular one with only 3 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 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 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 -17% during the third 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 many of these stocks already outperformed the market so far in 2019.
Disclosure: None. This article was originally published at Insider Monkey.
