Is Ares Dynamic Credit Allocation Fund Inc (NYSE:ARDC) a good stock to buy right now? We at Insider Monkey like to examine what billionaires and hedge funds think of a company before doing days of research on it. Given their 2 and 20 payment structure, hedge funds have more resources than the average investor. The funds have access to expert networks and get tips from industry insiders. They also have numerous Ivy League graduates and MBAs. Like everyone else, hedge funds perform miserably at times, but their consensus picks have historically outperformed the market after risk adjustments.
Ares Dynamic Credit Allocation Fund Inc (NYSE:ARDC) was in 4 hedge funds’ portfolios at the end of September. ARDC investors should be aware of an increase in hedge fund sentiment in recent months. There were 2 hedge funds in our database with ARDC holdings at the end of the previous quarter. At the end of this article we will also compare ARDC to other stocks, including McEwen Mining Inc (NYSE:MUX), United Community Financial Corp (NASDAQ:UCFC), and Tuesday Morning Corporation (NASDAQ:TUES) to get a better sense of its popularity.
Follow Ares Dynamic Credit Allocation Fund Inc. (NYSE:ARDC)
Follow Ares Dynamic Credit Allocation Fund Inc. (NYSE:ARDC)
If you’d ask most investors, hedge funds are seen as unimportant, outdated financial vehicles of years past. While there are over 8000 funds with their doors open at present, We choose to focus on the moguls of this club, around 700 funds. Most estimates calculate that this group of people direct the majority of the hedge fund industry’s total capital, and by following their unrivaled investments, Insider Monkey has spotted a few investment strategies that have historically outperformed the market. Insider Monkey’s small-cap hedge fund strategy exceeded the S&P 500 index by 12 percentage points per annum for a decade in their back tests.
With all of this in mind, we’re going to take a look at the recent action surrounding Ares Dynamic Credit Allocation Fund Inc (NYSE:ARDC).
How have hedgies been trading Ares Dynamic Credit Allocation Fund Inc (NYSE:ARDC)?
At the end of the third quarter, a total of 4 of the hedge funds tracked by Insider Monkey were long this stock, double the number at the end of the previous quarter. With the smart money’s positions undergoing their usual ebb and flow, there exists a select group of notable hedge fund managers who were increasing their holdings considerably (or already accumulated large positions).
According to Insider Monkey’s hedge fund database, Mariner Investment Group, managed by William Michaelcheck, holds the most valuable position in Ares Dynamic Credit Allocation Fund Inc (NYSE:ARDC). The fund reportedly holds a $5.2 million position in the stock, comprising 1.1% of its 13F portfolio. The second largest stake is held by Third Avenue Management, managed by Martin Whitman, which holds a $3.5 million position; the fund has 0.1% of its 13F portfolio invested in the stock. Some other peers with similar optimism encompass Benjamin A. Smith’s Laurion Capital Management and Charles Clough’s Clough Capital Partners.
As industrywide interest jumped, some big names have been driving this bullishness. Laurion Capital Management, managed by Benjamin A. Smith, initiated the largest position in Ares Dynamic Credit Allocation Fund Inc (NYSE:ARDC), worth roughly $0.5 million at the end of the quarter. The position initiated by Charles Clough’s Clough Capital Partners carried a value of $0.4 million at the end of September.
Let’s check out hedge fund activity in other stocks similar to Ares Dynamic Credit Allocation Fund Inc (NYSE:ARDC). These stocks are McEwen Mining Inc (NYSE:MUX), United Community Financial Corp (NASDAQ:UCFC), Tuesday Morning Corporation (NASDAQ:TUES), and Synta Pharmaceuticals Corp. (NASDAQ:SNTA). This group of stocks’ market values are similar to ARDC’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| MUX | 7 | 7806 | -3 |
| UCFC | 11 | 22815 | 0 |
| TUES | 13 | 42329 | -3 |
| SNTA | 7 | 4594 | -1 |
As you can see these stocks had an average of 10 hedge funds with bullish positions and the average amount invested in these stocks was $19 million. That figure was just $10 million in ARDC’s case. Tuesday Morning Corporation (NASDAQ:TUES) is the most popular stock in this table, while McEwen Mining Inc (NYSE:MUX) and Synta Pharmaceuticals Corp. (NASDAQ:SNTA) are at the other end of the specter with only 7 bullish hedge fund positions each. Compared to these stocks Ares Dynamic Credit Allocation Fund Inc (NYSE:ARDC) is even less popular than MUX. 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.