Hedge funds and other investment firms run by legendary investors like Israel Englander, Jeffrey Talpins and Ray Dalio are entrusted to manage billions of dollars of accredited investors’ money because they are without peer in the resources they use to identify the best investments for their chosen investment horizon. Moreover, they are more willing to invest a greater amount of their resources in small-cap stocks than big brokerage houses, and this is often where they generate their outperformance, which is why we pay particular attention to their best ideas in this space.
Is Ashland Global Holdings Inc. (NYSE:ASH) ready to rally soon? The best stock pickers are becoming hopeful. The number of bullish hedge fund bets inched up by 1 recently. Our calculations also showed that ASH isn’t among the 30 most popular stocks among hedge funds.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the market by 40 percentage points since May 2014 through May 30, 2019 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in our short portfolio.
Unlike some fund managers who are betting on Dow reaching 40000 in a year, our long-short investment strategy doesn’t rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. We’re going to take a gander at the new hedge fund action encompassing Ashland Global Holdings Inc. (NYSE:ASH).
How have hedgies been trading Ashland Global Holdings Inc. (NYSE:ASH)?
At the end of the second quarter, a total of 31 of the hedge funds tracked by Insider Monkey were long this stock, a change of 3% from the first quarter of 2019. The graph below displays the number of hedge funds with bullish position in ASH over the last 16 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, Ricky Sandler’s Eminence Capital has the largest position in Ashland Global Holdings Inc. (NYSE:ASH), worth close to $413.8 million, corresponding to 5.5% of its total 13F portfolio. The second most bullish fund manager is Empyrean Capital Partners, managed by Michael A. Price and Amos Meron, which holds a $147.5 million position; the fund has 6.6% of its 13F portfolio invested in the stock. Remaining peers that hold long positions comprise Jonathan Barrett and Paul Segal’s Luminus Management, Keith M. Rosenbloom’s Cruiser Capital Advisors and Ric Dillon’s Diamond Hill Capital.
As aggregate interest increased, some big names have jumped into Ashland Global Holdings Inc. (NYSE:ASH) headfirst. Eminence Capital, managed by Ricky Sandler, assembled the biggest position in Ashland Global Holdings Inc.. (NYSE:ASH). Eminence Capital had $413.8 million invested in the company at the end of the quarter. Ric Dillon’s Diamond Hill Capital also made a $110.2 million investment in the stock during the quarter. The following funds were also among the new ASH investors: Jonathan Barrett and Paul Segal’s Luminus Management, Matthew Mark’s Jet Capital Investors, and Daniel Beltzman and Gergory Smith’s Birch Run Capital.
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Ashland Global Holdings Inc. (NYSE:ASH) but similarly valued. We will take a look at ViaSat, Inc. (NASDAQ:VSAT), TFS Financial Corporation (NASDAQ:TFSL), Nutanix, Inc. (NASDAQ:NTNX), and Emcor Group Inc (NYSE:EME). This group of stocks’ market caps are closest to ASH’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| VSAT | 28 | 2028094 | 6 |
| TFSL | 5 | 153154 | -2 |
| NTNX | 25 | 643924 | -11 |
| EME | 22 | 351468 | -4 |
| Average | 20 | 794160 | -2.75 |
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 $794 million. That figure was $1317 million in ASH’s case. ViaSat, Inc. (NASDAQ:VSAT) is the most popular stock in this table. On the other hand TFS Financial Corporation (NASDAQ:TFSL) is the least popular one with only 5 bullish hedge fund positions. Compared to these stocks Ashland Global Holdings Inc. (NYSE:ASH) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Unfortunately ASH wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on ASH were disappointed as the stock returned -3.3% during the third quarter and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks (view the video below) among hedge funds as many of these stocks already outperformed the market in Q3.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.
