Should you Follow These Hedge Funds’ Moves? The Overall Sentiment May Give an Answer to this Question

The recent volatility in the market has shaken up most U.S. stocks, so hedge funds and other investors have started to rebalance or adjust their portfolios. They may either buy more shares on weakness or jettison some of the holdings that are not expected to provide any substantial benefits in the future. The following article will cover the moves disclosed by three elite hedge fund investors monitored by the Insider Monkey team. We will also discuss the hedge fund sentiment on each stock covered in this article in order to find out what top money managers think of them.

Why do we pay attention to hedge fund sentiment? Most investors ignore hedge funds’ moves because as a group their average net returns trailed the market since 2008 by a large margin. Unfortunately, most investors don’t realize that hedge funds are hedged and they also charge an arm and a leg, so they are likely to underperform in a bull market. We ignore their short positions and by imitating hedge funds’ stock picks independently, we don’t have to pay them a dime. Our research has shown that hedge funds’ long stock picks generate strong risk adjusted returns. For instance the 15 most popular small-cap stocks outperformed the S&P 500 Index by an average of 95 basis points per month in our back-tests spanning the 1999-2012 period. We have been tracking the performance of these stocks in real-time since the end of August 2012. After all, things change and we need to verify that back-test results aren’t just a statistical fluke. We weren’t proven wrong. These 15 stocks managed to return more than 118% over the last 36 months and outperformed the S&P 500 Index by 60 percentage points (see the details here).

To start off, Clint Carlson’s Carlson Capital reported selling 50,000 shares of Ultratech Inc. (NASDAQ:UTEK) at a weighted average price of $15.45 via a Form 4 filing with the SEC, reducing its overall position to 3.25 million shares. A little more than a week ago, Carlson Capital sold an additional 80,761 shares at prices ranging from $15.66 to $15.68 per share (read more details here). It appears that the hedge fund industry is not very fond of this stock either, as the number of money managers invested in Ultratech Inc. (NASDAQ:UTEK) decreased to 11 from 13 during the second quarter. However, the value of their investments increased by nearly 20% to $113.12 million during the three-month period. At the same time, the hedge funds tracked by Insider Monkey stockpiled 22.10% of Ultratech’s outstanding common stock as of June 30. The shares of Ultratech appear to be in a bottoming-out phase at the moment, after losing slightly more than 10% since the beginning of 2015. D.E. Shaw & Co. L.P., founded by David E. Shaw, represents another top shareholder of Ultratech Inc. (NASDAQ:UTEK) with slightly more than 736,000 shares.

Abrams Capital Management, founded by David Abrams, disclosed acquiring 266,183 shares of Barnes & Noble Education Inc. (NYSE:BNED) at a weighted average price of $12.53. According to the recently-filed Form 4, the investment firm owns 7.41 million shares of the recently spun-off company. As a matter of fact, Abrams Capital has been continuously acquiring shares of Barnes & Noble Education since its spin-off, as the recent stock market mini-crashes made this stock even more attractive. On September 9, the contract operator of bookstores revealed its first post-IPO earnings report, which partially disclosed the potential of Barnes & Noble Education as a standalone company. The company’s sales increased by 5.9% year-over-year to $239 million, whereas its loss widened to $26.9 million from $26.2 million. Even so, Barnes & Noble Education Inc. (NYSE:BNED) still has more room to grow its activities and operations, considering that 53% of the U.S. college and university-affiliated bookstores are managed by their own institutions.

As stated in another Form 4 filing, Coliseum Capital Management, founded by Christopher Shackelton and Adam Gray, boosted its holdings in Accuride Corporation (NYSE:ACW) by 68,092 shares. These shares were acquired at a weighted average price of $2.75, while the stake currently owned by the investment firm amasses 7.47 million shares. Just recently, Coliseum Capital reported lifting its position in Accuride Corporation by an additional 250,214 shares. The manufacturer of commercial vehicle components lost some of its charm among the hedge fund industry during the second quarter, as the number investors with stakes in the company decreased to 14 from 20 quarter-over-quarter. Similarly, the value of their holdings decreased to $43.97 million from $58.69 million. It is also worth to mention that these hedge fund investors accumulated 23.80% of the company’s outstanding shares at the end of the June quarter, which could point to the fact that the smart money still believes in the future of Accuride Corporation. Peter Schliemann’s Rutabaga Capital Management held its position in Accuride Corporation (NYSE:ACW) unchanged during the June quarter at 2.86 million shares.

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