Should You Buy Asbury Automotive Group, Inc. (ABG)?

Hedge funds run by legendary names like Nelson Peltz and David Tepper make billions of dollars a year for themselves and their super-rich accredited investors (you’ve got to have a minimum of $1 million liquid to invest in a hedge fund) by spending enormous resources on analyzing and uncovering data about small-cap stocks that the big brokerage houses don’t follow. Small caps are where they can generate significant out-performance. That’s why we pay special attention to hedge fund activity in these stocks.

Asbury Automotive Group, Inc. (NYSE:ABG) investors should pay attention to an increase in hedge fund interest recently. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity, but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Teekay Corporation (NYSE:TK), CyrusOne Inc (NASDAQ:CONE), and Monro Muffler Brake Inc (NASDAQ:MNRO) to gather more data points.

In the 21st century investor’s toolkit there are several gauges stock traders can use to appraise stocks. A pair of the most underrated gauges are hedge fund and insider trading interest. Our experts have shown that, historically, those who follow the best picks of the elite hedge fund managers can outpace the S&P 500 by a healthy margin (see the details here).

Keeping this in mind, let’s take a peek at the key action surrounding Asbury Automotive Group, Inc. (NYSE:ABG).

Hedge fund activity in Asbury Automotive Group, Inc. (NYSE:ABG)

At Q3’s end, a total of 27 of the hedge funds tracked by Insider Monkey held long positions in this stock, an increase of 29% from the second quarter. With hedgies’ sentiment swirling, there exists a select group of noteworthy hedge fund managers who were boosting their holdings significantly (or already accumulated large positions).

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, LionEye Capital Management, managed by Stephen V. Raneri, holds the largest position in Asbury Automotive Group, Inc. (NYSE:ABG). At the end of the quarter, the fund had a $209.3 million position in the stock, comprising 8.7% of its 13F portfolio. Sitting at the No. 2 spot is MSD Capital, led by Glenn Fuhrman and John Phelan, holding a $180.6 million position; 24.1% of its 13F portfolio is allocated to the stock. Remaining hedge funds and institutional investors that hold long positions consist of Ricky Sandler’s Eminence Capital, Jason Karp’s Tourbillon Capital Partners and Paul Orlin and Alex Porter’s Amici Capital.

As industrywide interest jumped, specific money managers have jumped into Asbury Automotive Group, Inc. (NYSE:ABG) headfirst. Tourbillon Capital Partners, managed by Jason Karp, initiated the biggest position in Asbury Automotive Group, Inc. (NYSE:ABG). According to its latest 13F filing, the fund had $69.1 million invested in the company at the end of the quarter. Karp and Tourbillon Capital Partners have also stockpiled $17.3 million worth of call options during the quarter. The following funds were among the new ABG investors as well: Charles Davidson’s Wexford Capital, Andrew Sandler’s Sandler Capital Management, and Jonathan Lennon’s Pleasant Lake Partners.

Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Asbury Automotive Group, Inc. (NYSE:ABG) but similarly valued. These stocks are Teekay Corporation (NYSE:TK), CyrusOne Inc (NASDAQ:CONE), Monro Muffler Brake Inc (NASDAQ:MNRO), and WP Glimcher Inc (NYSE:WPG). This group of stocks’ market values match ABG’s market value.

As you can see these stocks had an average of 17 hedge funds with bullish positions and the average amount invested in these stocks was $221 million. Teekay Corporation (NYSE:TK) is the most popular stock in this table, while WP Glimcher Inc (NYSE:WPG) and Monro Muffler Brake Inc (NASDAQ:MNRO) are lagging behind with only 16 bullish hedge fund positions. Asbury Automotive Group, Inc. (NYSE:ABG) wins this popularity contest, as it is present in the portfolios of 27 top funds at the end of the quarter and having also attracted $808 million in investments. Considering that hedge funds are fond of this stock in relation to its market cap peers, it may be a good idea to analyze it in detail and potentially include it in your portfolio.