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 Superconductor Corporation (NASDAQ:AMSC).
Is American Superconductor Corporation (NASDAQ:AMSC) a buy here? It looks like the smart money is reducing their bets on the stock. Among the investors we track, the number of bullish hedge fund bets shrunk by three last quarter. At the end of this article we will also compare AMSC to other stocks including Ballantyne Strong Inc (NYSEAMEX:BTN), ASB Bancorp Inc (NASDAQ:ASBB), and Carolina Bank Holding Inc. (NC) (NASDAQ:CLBH) to get a better sense of its popularity.
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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Keeping this in mind, let’s go over the recent action surrounding American Superconductor Corporation (NASDAQ:AMSC).
How are hedge funds trading American Superconductor Corporation (NASDAQ:AMSC)?
At the end of the third quarter, six funds tracked by Insider Monkey were bullish on this stock, down by 33% from the end of the second quarter of 2016. Below, you can check out the change in hedge fund sentiment towards AMSC over the last five quarters. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Jim Simons’ Renaissance Technologies, which is one of the largest hedge funds in the world, has the number one position in American Superconductor Corporation (NASDAQ:AMSC), worth close to $2.9 million. The second largest stake is held by Philip Hempleman’s Ardsley Partners holding a $0.5 million position. Remaining peers that hold long positions include Ken Griffin’s Citadel Investment Group, Matt Sirovich and Jeremy Mindich’s Scopia Capital and Joseph Mathias’ Concourse Capital Management. 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.
We already know that not all hedge funds are bullish on the stock and some hedge funds actually got rid of their positions entirely. It’s worth mentioning that GMT Capital got rid of the largest investment of all the investors followed by Insider Monkey, totaling close to $0.9 million in stock. Israel Englander’s fund, Millennium Management, also dropped its stock, about $0.4 million worth.
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as American Superconductor Corporation (NASDAQ:AMSC) but similarly valued. These stocks are Ballantyne Strong Inc (NYSEAMEX:BTN), ASB Bancorp Inc (NASDAQ:ASBB), Carolina Bank Holding Inc. (NC) (NASDAQ:CLBH), and Aldeyra Therapeutics Inc (NASDAQ:ALDX). This group of stocks’ market values are similar to AMSC’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| BTN | 5 | 23812 | 1 |
| ASBB | 4 | 9022 | -1 |
| CLBH | 6 | 10130 | 1 |
| ALDX | 5 | 18996 | -2 |
As you can see these stocks had an average of five hedge funds with bullish positions and the average amount invested in these stocks was $15 million. That figure was $4 million in AMSC’s case. Carolina Bank Holding Inc. (NC) (NASDAQ:CLBH) is the most popular stock in this table. On the other hand ASB Bancorp Inc (NASDAQ:ASBB) is the least popular one with only four bullish hedge fund positions. American Superconductor Corporation (NASDAQ:AMSC) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. In this regard CLBH might be a better candidate to consider taking a long position in.
Disclosure: None
