How do you pick the next stock to invest in? One way would be to spend days 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 ASGN Incorporated (NYSE:ASGN).
Is ASGN a good stock to buy now? ASGN Incorporated (NYSE:ASGN) investors should pay attention to an increase in support from the world’s most elite money managers recently. ASGN Incorporated (NYSE:ASGN) was in 21 hedge funds’ portfolios at the end of September. The all time high for this statistic is 23. There were 13 hedge funds in our database with ASGN holdings at the end of June. Our calculations also showed that ASGN isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video for a quick look at the top 5 stocks).
Video: Watch our video about the top 5 most popular hedge fund stocks.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 66 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’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 13% through November 17th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Noam Gottesman of GLG Partners
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 15 best blue chip stocks to pick the best large-cap stocks to buy. 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 recent hedge fund action surrounding ASGN Incorporated (NYSE:ASGN).
Do Hedge Funds Think ASGN Is A Good Stock To Buy Now?
Heading into the fourth quarter of 2020, a total of 21 of the hedge funds tracked by Insider Monkey were long this stock, a change of 62% from the second quarter of 2020. On the other hand, there were a total of 17 hedge funds with a bullish position in ASGN a year ago. So, let’s find out 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, Ken Griffin’s Citadel Investment Group has the number one position in ASGN Incorporated (NYSE:ASGN), worth close to $38 million, accounting for less than 0.1%% of its total 13F portfolio. On Citadel Investment Group’s heels is AQR Capital Management, managed by Cliff Asness, which holds a $14.2 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Other members of the smart money with similar optimism include Noam Gottesman’s GLG Partners, Ira Unschuld’s Brant Point Investment Management and Israel Englander’s Millennium Management. In terms of the portfolio weights assigned to each position Brant Point Investment Management allocated the biggest weight to ASGN Incorporated (NYSE:ASGN), around 0.34% of its 13F portfolio. Quantinno Capital is also relatively very bullish on the stock, dishing out 0.25 percent of its 13F equity portfolio to ASGN.
With a general bullishness amongst the heavyweights, specific money managers were breaking ground themselves. Millennium Management, managed by Israel Englander, initiated the biggest position in ASGN Incorporated (NYSE:ASGN). Millennium Management had $2.2 million invested in the company at the end of the quarter. Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital also made a $2 million investment in the stock during the quarter. The other funds with new positions in the stock are Greg Eisner’s Engineers Gate Manager, Paul Marshall and Ian Wace’s Marshall Wace LLP, and Jinghua Yan’s TwinBeech Capital.
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as ASGN Incorporated (NYSE:ASGN) but similarly valued. We will take a look at Western Midstream Partners, LP (NYSE:WES), frontdoor, inc. (NASDAQ:FTDR), Scientific Games Corp (NASDAQ:SGMS), Ardagh Group S.A. (NYSE:ARD), I-Mab (NASDAQ:IMAB), Louisiana-Pacific Corporation (NYSE:LPX), and Power Integrations Inc (NASDAQ:POWI). This group of stocks’ market valuations match ASGN’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| WES | 10 | 65743 | -1 |
| FTDR | 38 | 694601 | -3 |
| SGMS | 25 | 990729 | 1 |
| ARD | 7 | 57156 | 0 |
| IMAB | 11 | 184475 | 8 |
| LPX | 40 | 514404 | 2 |
| POWI | 20 | 109923 | 3 |
| Average | 21.6 | 373862 | 1.4 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 21.6 hedge funds with bullish positions and the average amount invested in these stocks was $374 million. That figure was $74 million in ASGN’s case. Louisiana-Pacific Corporation (NYSE:LPX) is the most popular stock in this table. On the other hand Ardagh Group S.A. (NYSE:ARD) is the least popular one with only 7 bullish hedge fund positions. ASGN Incorporated (NYSE:ASGN) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for ASGN is 58.6. 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 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 30.7% in 2020 through December 14th and still beat the market by 15.8 percentage points. A small number of hedge funds were also right about betting on ASGN as the stock returned 31.7% since the end of the third quarter (through 12/14) and outperformed the market by an even larger margin.
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Disclosure: None. This article was originally published at Insider Monkey.
