Should You Avoid Assertio Holdings, Inc. (ASRT)?

The latest 13F reporting period has come and gone, and Insider Monkey have plowed through 821 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds’ and investors’ portfolio positions as of March 31st, a week after the market trough. Now, we are almost done with the second quarter. Investors decided to bet on the economic recovery and a stock market rebound. S&P 500 Index returned almost 20% this quarter. In this article you are going to find out whether hedge funds thought Assertio Holdings, Inc. (NASDAQ:ASRT) was a good investment heading into the second quarter and how the stock traded in comparison to the top hedge fund picks.

Assertio Holdings, Inc. (NASDAQ:ASRT) investors should be aware of a decrease in enthusiasm from smart money of late. Our calculations also showed that ASRT isn’t among the 30 most popular stocks among hedge funds (click for Q1 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.

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 S&P 500 ETFs by more than 58 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 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 stocks that are in our short portfolio.

Cliff Asness of AQR Capital Management

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, we take a look at lists like the 12 largest cement producing countries to identify emerging trends that are likely to lead to 1000% gains in the coming years. We interview hedge fund managers and ask them about their best ideas. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. For example we are checking out stocks recommended/scorned by legendary Bill Miller. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 in February after realizing the coronavirus pandemic’s significance before most investors. Now we’re going to take a look at the new hedge fund action surrounding Assertio Holdings, Inc. (NASDAQ:ASRT).

What have hedge funds been doing with Assertio Holdings, Inc. (NASDAQ:ASRT)?

At Q1’s end, a total of 13 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -7% from one quarter earlier. On the other hand, there were a total of 14 hedge funds with a bullish position in ASRT a year ago. With hedgies’ sentiment swirling, there exists an “upper tier” of notable hedge fund managers who were adding to their stakes substantially (or already accumulated large positions).

More specifically, Renaissance Technologies was the largest shareholder of Assertio Holdings, Inc. (NASDAQ:ASRT), with a stake worth $4.1 million reported as of the end of September. Trailing Renaissance Technologies was AQR Capital Management, which amassed a stake valued at $2.3 million. Rubric Capital Management, D E Shaw, and Highbridge Capital Management were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Rubric Capital Management allocated the biggest weight to Assertio Holdings, Inc. (NASDAQ:ASRT), around 0.35% of its 13F portfolio. Highbridge Capital Management is also relatively very bullish on the stock, setting aside 0.14 percent of its 13F equity portfolio to ASRT.

Because Assertio Holdings, Inc. (NASDAQ:ASRT) has faced falling interest from hedge fund managers, logic holds that there was a specific group of fund managers who sold off their positions entirely last quarter. It’s worth mentioning that Ken Griffin’s Citadel Investment Group sold off the largest stake of the 750 funds followed by Insider Monkey, worth an estimated $0.1 million in stock, and Donald Sussman’s Paloma Partners was right behind this move, as the fund dropped about $0 million worth. These bearish behaviors are intriguing to say the least, as aggregate hedge fund interest dropped by 1 funds last quarter.

Let’s go over hedge fund activity in other stocks similar to Assertio Holdings, Inc. (NASDAQ:ASRT). These stocks are Cypress Environmental Partners, L.P. (NYSE:CELP), Lantronix Inc (NASDAQ:LTRX), Innovative Solutions & Support Inc (NASDAQ:ISSC), and Central Federal Corporation (NASDAQ:CFBK). This group of stocks’ market caps resemble ASRT’s market cap.

View table here if you experience formatting issues.

As you can see these stocks had an average of 1.75 hedge funds with bullish positions and the average amount invested in these stocks was $1 million. That figure was $15 million in ASRT’s case. Innovative Solutions & Support Inc (NASDAQ:ISSC) is the most popular stock in this table. On the other hand Cypress Environmental Partners, L.P. (NYSE:CELP) is the least popular one with only 1 bullish hedge fund positions. Compared to these stocks Assertio Holdings, Inc. (NASDAQ:ASRT) is more popular among hedge funds. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks returned 13.3% in 2020 through June 25th but still managed to beat the market by 16.8 percentage points. Hedge funds were also right about betting on ASRT as the stock returned 30.8% so far in Q2 (through June 25th) and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.

Disclosure: None. This article was originally published at Insider Monkey.