How do you pick the next stock to invest in? One way would be to spend hours of research browsing through thousands of publicly traded companies. However, an easier way is to look at the stocks that smart money investors are collectively bullish on. Hedge funds and other institutional investors usually invest large amounts of capital and have to conduct due diligence while choosing their next pick. They don’t always get it right, but, on average, their stock picks historically generated strong returns after adjusting for known risk factors. With this in mind, let’s take a look at the recent hedge fund activity surrounding AK Steel Holding Corporation (NYSE:AKS).
AK Steel Holding Corporation (NYSE:AKS) shares haven’t seen a lot of action during the third quarter. Overall, hedge fund sentiment was unchanged. The stock was in 20 hedge funds’ portfolios at the end of September. At the end of this article we will also compare AKS to other stocks including Caleres Inc (NYSE:CAL), Central Puerto S.A. (NYSE:CEPU), and Clovis Oncology Inc (NASDAQ:CLVS) to get a better sense of its popularity.
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s flagship best performing hedge funds strategy returned 6.3% year to date (through December 3rd) and outperformed the market even though it draws its stock picks among small-cap stocks. This strategy also outperformed the market by 18 percentage points since its inception (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
Let’s review the key hedge fund action encompassing AK Steel Holding Corporation (NYSE:AKS).
How are hedge funds trading AK Steel Holding Corporation (NYSE:AKS)?
Heading into the fourth quarter of 2018, a total of 20 of the hedge funds tracked by Insider Monkey were bullish on this stock, representing no change from the second quarter of 2018. Below, you can check out the change in hedge fund sentiment towards AKS over the last 13 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.
Among these funds, Royce & Associates held the most valuable stake in AK Steel Holding Corporation (NYSE:AKS), which was worth $10.4 million at the end of the third quarter. On the second spot was DC Capital Partners which amassed $9.8 million worth of shares. Moreover, Millennium Management, Anchor Bolt Capital, and Blue Mountain Capital were also bullish on AK Steel Holding Corporation (NYSE:AKS), allocating a large percentage of their portfolios to this stock.
Since AK Steel Holding Corporation (NYSE:AKS) has witnessed bearish sentiment from the smart money, it’s easy to see that there were a few money managers who sold off their positions entirely last quarter. Interestingly, Dmitry Balyasny’s Balyasny Asset Management cut the largest stake of the 700 funds watched by Insider Monkey, totaling about $28.7 million in stock, and Mike Masters’s Masters Capital Management was right behind this move, as the fund dropped about $4.1 million worth. These moves are important to note, as total hedge fund interest stayed the same (this is a bearish signal in our experience).
Let’s go over hedge fund activity in other stocks similar to AK Steel Holding Corporation (NYSE:AKS). We will take a look at Caleres Inc (NYSE:CAL), Central Puerto S.A. (NYSE:CEPU), Clovis Oncology Inc (NASDAQ:CLVS), and Gray Television, Inc. (NYSE:GTN). This group of stocks’ market valuations are similar to AKS’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| CAL | 17 | 38670 | 2 |
| CEPU | 9 | 37857 | 1 |
| CLVS | 32 | 673672 | -3 |
| GTN | 22 | 261837 | -2 |
| Average | 20 | 253009 | -0.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 20 hedge funds with bullish positions and the average amount invested in these stocks was $253 million. That figure was $76 million in AKS’s case. Clovis Oncology Inc (NASDAQ:CLVS) is the most popular stock in this table. On the other hand Central Puerto S.A. (NYSE:CEPU) is the least popular one with only 9 bullish hedge fund positions. AK Steel Holding Corporation (NYSE:AKS) 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. In this regard CLVS might be a better candidate to consider a long position.
Disclosure: None. This article was originally published at Insider Monkey.
