Hedge fund managers like David Einhorn, Dan Loeb, 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: American Renal Associates Holdings Inc (NYSE:ARA).
American Renal Associates Holdings Inc (NYSE:ARA) was in 7 hedge funds’ portfolios at the end of September. ARA investors should pay attention to a decrease in support from the world’s most successful money managers of late. There were 11 hedge funds in our database with ARA positions at the end of the previous quarter. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Atwood Oceanics, Inc. (NYSE:ATW), Keryx Biopharmaceuticals (NASDAQ:KERX), and Aceto Corporation (NASDAQ:ACET) to gather more data points.
Follow American Renal Associates Holdings Inc. (NYSE:ARA)
Follow American Renal Associates Holdings Inc. (NYSE:ARA)
At Insider Monkey, we’ve developed an investment strategy that has delivered market-beating returns over the past 12 months. Our strategy identifies the 100 best-performing funds of the previous quarter from among the collection of 700+ successful funds that we track in our database, which we accomplish using our returns methodology. We then study the portfolios of those 100 funds using the latest 13F data to uncover the 30 most popular mid-cap stocks (market caps of between $1 billion and $10 billion) among them to hold until the next filing period. This strategy delivered 18% gains over the past 12 months, more than doubling the 8% returns enjoyed by the S&P 500 ETFs.
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Now, we’re going to check out the fresh action regarding American Renal Associates Holdings Inc (NYSE:ARA).
How are hedge funds trading American Renal Associates Holdings Inc (NYSE:ARA)?
At Q3’s end, a total of 7 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -36% from the previous quarter. The graph below displays the number of hedge funds with bullish position in ARA over the last 5 quarters. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Of the funds tracked by Insider Monkey, Centerbridge Partners, led by Mark T. Gallogly, holds the largest position in American Renal Associates Holdings Inc (NYSE:ARA). Centerbridge Partners has a $321.8 million position in the stock, comprising 26.3% of its 13F portfolio. The second largest stake is held by Tamarack Capital Management, led by Justin John Ferayorni, holding a $1.8 million position; 0.6% of its 13F portfolio is allocated to the stock. Other hedge funds and institutional investors that are bullish consist of Joel Greenblatt’s Gotham Asset Management, Ken Griffin’s Citadel Investment Group and Millennium Management, one of the 10 largest hedge funds in the world. We should note that none of these hedge funds are among our list of the 100 best performing hedge funds which is based on the performance of their 13F long positions in non-microcap stocks.
Now that we’ve mentioned the most bullish investors, let’s also take a look at some funds that dumped their entire stakes in the stock during the third quarter. It’s worth mentioning that Kris Jenner, Gordon Bussard, Graham McPhail’s Rock Springs Capital Management dumped the largest stake of the “upper crust” of funds tracked by Insider Monkey, valued at close to $7.2 million in stock, and Jeremy Green’s Redmile Group was right behind this move, as the fund dropped about $4.3 million worth of shares.
Let’s also examine hedge fund activity in other stocks similar to American Renal Associates Holdings Inc (NYSE:ARA). We will take a look at Atwood Oceanics, Inc. (NYSE:ATW), Keryx Biopharmaceuticals (NASDAQ:KERX), Aceto Corporation (NASDAQ:ACET), and FTD Companies Inc (NASDAQ:FTD). This group of stocks’ market valuations resemble ARA’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| ATW | 15 | 69638 | -5 |
| KERX | 11 | 174265 | -1 |
| ACET | 11 | 59959 | 3 |
| FTD | 14 | 50990 | 2 |
As you can see these stocks had an average of 12.75 hedge funds with bullish positions and the average amount invested in these stocks was $89 million. That figure was $327 million in ARA’s case. Atwood Oceanics, Inc. (NYSE:ATW) is the most popular stock in this table. On the other hand Keryx Biopharmaceuticals (NASDAQ:KERX) is the least popular one with only 11 bullish hedge fund positions. Compared to these stocks American Renal Associates Holdings Inc (NYSE:ARA) is even less popular than KERX. Considering that hedge funds aren’t fond of this stock in relation to other companies analyzed in this article, it may be a good idea to analyze it in detail and understand why the smart money isn’t behind this stock. This isn’t necessarily bad news. Although it is possible that hedge funds may think the stock is overpriced and view the stock as a short candidate, they may not be very familiar with the bullish thesis. In either case more research is warranted.
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