Reputable billionaire investors such as Jim Simons, Cliff Asness and David Tepper generate exorbitant profits for their wealthy accredited investors (a minimum of $1 million in investable assets would be required to invest in a hedge fund and most successful hedge funds won’t accept your savings unless you commit at least $5 million) by pinpointing winning small-cap stocks. There is little or no publicly-available information at all on some of these small companies, which makes it hard for an individual investor to pin down a winner within the small-cap space. However, hedge funds and other big asset managers can do the due diligence and analysis for you instead, thanks to their highly-skilled research teams and vast resources to conduct an appropriate evaluation process. Looking for potential winners within the small-cap galaxy of stocks? We believe following the smart money is a good starting point.
Is Atkore International Group Inc. (NYSE:ATKR) an excellent investment today? Prominent investors are in a bearish mood. The number of long hedge fund positions were trimmed by 7 recently. Our calculations also showed that ATKR isn’t among the 30 most popular stocks among hedge funds. ATKR was in 17 hedge funds’ portfolios at the end of the fourth quarter of 2018. There were 24 hedge funds in our database with ATKR positions at the end of the previous quarter.
Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research has shown that hedge funds’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the market by 32 percentage points since May 2014 through March 12, 2019 (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 27.5% through March 12, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Let’s view the fresh hedge fund action surrounding Atkore International Group Inc. (NYSE:ATKR).
What does the smart money think about Atkore International Group Inc. (NYSE:ATKR)?
Heading into the first quarter of 2019, a total of 17 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -29% from the previous quarter. The graph below displays the number of hedge funds with bullish position in ATKR over the last 14 quarters. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Atkore International Group Inc. (NYSE:ATKR) was held by GLG Partners, which reported holding $24.3 million worth of stock at the end of December. It was followed by AQR Capital Management with a $15.7 million position. Other investors bullish on the company included Two Sigma Advisors, Renaissance Technologies, and Millennium Management.
Since Atkore International Group Inc. (NYSE:ATKR) has faced bearish sentiment from the smart money, it’s safe to say that there lies a certain “tier” of hedge funds who were dropping their entire stakes heading into Q3. Intriguingly, Richard Driehaus’s Driehaus Capital cut the largest stake of the 700 funds tracked by Insider Monkey, worth close to $8.6 million in stock, and Benjamin A. Smith’s Laurion Capital Management was right behind this move, as the fund said goodbye to about $1 million worth. These transactions are important to note, as total hedge fund interest dropped by 7 funds heading into Q3.
Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Atkore International Group Inc. (NYSE:ATKR) but similarly valued. We will take a look at Retrophin Inc (NASDAQ:RTRX), Sturm, Ruger & Company (NYSE:RGR), Boise Cascade Co (NYSE:BCC), and Hess Midstream Partners LP (NYSE:HESM). This group of stocks’ market values match ATKR’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| RTRX | 22 | 373738 | 0 |
| RGR | 14 | 85987 | 0 |
| BCC | 15 | 42385 | -7 |
| HESM | 6 | 5372 | 0 |
| Average | 14.25 | 126871 | -1.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 14.25 hedge funds with bullish positions and the average amount invested in these stocks was $127 million. That figure was $90 million in ATKR’s case. Retrophin Inc (NASDAQ:RTRX) is the most popular stock in this table. On the other hand Hess Midstream Partners LP (NYSE:HESM) is the least popular one with only 6 bullish hedge fund positions. Atkore International Group Inc. (NYSE:ATKR) is not the most popular stock in this group but hedge fund interest is still above average. Our calculations showed that top 15 most popular stocks) among hedge funds returned 24.2% through April 22nd and outperformed the S&P 500 ETF (SPY) by more than 7 percentage points. Hedge funds were also right about betting on ATKR, though not to the same extent, as the stock returned 20.8% and outperformed the market as well.
Disclosure: None. This article was originally published at Insider Monkey.
