Is ABG Stock A Buy or Sell?

Before we spend countless hours researching a company, we like to analyze what insiders, hedge funds and billionaire investors think of the stock first. This is a necessary first step in our investment process because our research has shown that the elite investors’ consensus returns have been exceptional. In the following paragraphs, we find out what the billionaire investors and hedge funds think of Asbury Automotive Group, Inc. (NYSE:ABG).

Is ABG stock a buy? Asbury Automotive Group, Inc. (NYSE:ABG) shareholders have witnessed a decrease in hedge fund sentiment in recent months. Asbury Automotive Group, Inc. (NYSE:ABG) was in 23 hedge funds’ portfolios at the end of December. The all time high for this statistic is 33. Our calculations also showed that ABG isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings).

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 S&P 500 ETFs by 124 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 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.

Ricky Sandler of Eminence Capital

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, auto parts business is a recession resistant business, so we are taking a closer look at this discount auto parts stock that is growing at a 196% annualized rate. We go through lists like the 15 best micro-cap stocks to buy now to identify the next stock with 10x upside potential. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our website. Now let’s take a glance at the key hedge fund action regarding Asbury Automotive Group, Inc. (NYSE:ABG).

Do Hedge Funds Think ABG Is A Good Stock To Buy Now?

At Q4’s end, a total of 23 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -18% from the third quarter of 2020. The graph below displays the number of hedge funds with bullish position in ABG over the last 22 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.

The largest stake in Asbury Automotive Group, Inc. (NYSE:ABG) was held by Abrams Capital Management, which reported holding $308.7 million worth of stock at the end of December. It was followed by Impactive Capital with a $115.7 million position. Other investors bullish on the company included Lakewood Capital Management, Simcoe Capital Management, and Eminence Capital. In terms of the portfolio weights assigned to each position Impactive Capital allocated the biggest weight to Asbury Automotive Group, Inc. (NYSE:ABG), around 20.3% of its 13F portfolio. Simcoe Capital Management is also relatively very bullish on the stock, earmarking 9.8 percent of its 13F equity portfolio to ABG.

Since Asbury Automotive Group, Inc. (NYSE:ABG) has faced bearish sentiment from hedge fund managers, logic holds that there lies a certain “tier” of hedge funds who sold off their entire stakes in the fourth quarter. Intriguingly, Robert Bishop’s Impala Asset Management dumped the largest position of all the hedgies followed by Insider Monkey, totaling about $6.9 million in stock. Mika Toikka’s fund, AlphaCrest Capital Management, also dropped its stock, about $0.9 million worth. These transactions are important to note, as total hedge fund interest fell by 5 funds in the fourth quarter.

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Asbury Automotive Group, Inc. (NYSE:ABG) but similarly valued. These stocks are Taro Pharmaceutical Industries Ltd. (NYSE:TARO), Dorman Products Inc. (NASDAQ:DORM), JinkoSolar Holding Co., Ltd. (NYSE:JKS), PriceSmart, Inc. (NASDAQ:PSMT), Papa John’s International, Inc. (NASDAQ:PZZA), Harmony Gold Mining Co. (NYSE:HMY), and Beacon Roofing Supply, Inc. (NASDAQ:BECN). This group of stocks’ market caps resemble ABG’s market cap.

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As you can see these stocks had an average of 17.4 hedge funds with bullish positions and the average amount invested in these stocks was $168 million. That figure was $686 million in ABG’s case. Papa John’s International, Inc. (NASDAQ:PZZA) is the most popular stock in this table. On the other hand Taro Pharmaceutical Industries Ltd. (NYSE:TARO) is the least popular one with only 6 bullish hedge fund positions. Asbury Automotive Group, Inc. (NYSE:ABG) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for ABG is 53.6. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. Our calculations showed that top 30 most popular stocks among hedge funds returned 81.2% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 26 percentage points. These stocks gained 12.3% in 2021 through April 19th and still beat the market by 0.9 percentage points. Hedge funds were also right about betting on ABG as the stock returned 41.1% since the end of Q4 (through 4/19) and outperformed the market. Hedge funds were rewarded for their relative bullishness.

Disclosure: None. This article was originally published at Insider Monkey.

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