Ascena Retail Group Inc (ASNA): Hedge Funds In Wait-and-See Mode

In this article we will take a look at whether hedge funds think Ascena Retail Group Inc (NASDAQ:ASNA) is a good investment right now. We check hedge fund and billionaire investor sentiment before delving into hours of research. Hedge funds spend millions of dollars on Ivy League graduates, unconventional data sources, expert networks, and get tips from investment bankers and industry insiders. Sure they sometimes fail miserably, but their consensus stock picks historically outperformed the market after adjusting for known risk factors.

Hedge fund interest in Ascena Retail Group Inc (NASDAQ:ASNA) shares was flat at the end of last quarter. This is usually a negative indicator. At the end of this article we will also compare ASNA to other stocks including Sequential Brands Group Inc (NASDAQ:SQBG), Endologix, Inc. (NASDAQ:ELGX), and Genetic Technologies Limited (NASDAQ:GENE) to get a better sense of its popularity.

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If you’d ask most market participants, hedge funds are seen as slow, old financial tools of years past. While there are greater than 8000 funds trading today, Our experts choose to focus on the upper echelon of this group, about 850 funds. Most estimates calculate that this group of people shepherd the lion’s share of the hedge fund industry’s total capital, and by keeping track of their inimitable stock picks, Insider Monkey has brought to light many investment strategies that have historically outpaced Mr. Market. Insider Monkey’s flagship short hedge fund strategy outrun the S&P 500 short ETFs by around 20 percentage points per year since its inception in March 2017. Our portfolio of short stocks lost 36% since February 2017 (through May 18th) even though the market was up 30% during the same period. We just shared a list of 8 short targets in our latest quarterly update .


Cliff Asness of AQR Capital Management

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, We take a look at lists like the 10 most profitable companies in the world to identify the compounders that are likely to deliver double digit returns. 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 let’s review the new hedge fund action regarding Ascena Retail Group Inc (NASDAQ:ASNA).

How are hedge funds trading Ascena Retail Group Inc (NASDAQ:ASNA)?

At Q1’s end, a total of 9 of the hedge funds tracked by Insider Monkey were long this stock, a change of 0% from the previous quarter. By comparison, 16 hedge funds held shares or bullish call options in ASNA a year ago. With the smart money’s capital changing hands, there exists an “upper tier” of key hedge fund managers who were boosting their stakes meaningfully (or already accumulated large positions).

More specifically, Stadium Capital Management was the largest shareholder of Ascena Retail Group Inc (NASDAQ:ASNA), with a stake worth $1.3 million reported as of the end of September. Trailing Stadium Capital Management was Renaissance Technologies, which amassed a stake valued at $0.8 million. AQR Capital Management, Halcyon Asset Management, and Marshall Wace LLP 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 Stadium Capital Management allocated the biggest weight to Ascena Retail Group Inc (NASDAQ:ASNA), around 0.76% of its 13F portfolio. Halcyon Asset Management is also relatively very bullish on the stock, designating 0.05 percent of its 13F equity portfolio to ASNA.

Judging by the fact that Ascena Retail Group Inc (NASDAQ:ASNA) has faced a decline in interest from the smart money, logic holds that there was a specific group of money managers that slashed their positions entirely last quarter. At the top of the heap, John Overdeck and David Siegel’s Two Sigma Advisors sold off the largest investment of all the hedgies monitored by Insider Monkey, comprising close to $0.2 million in stock, and James Thomas Berylson’s Berylson Capital Partners was right behind this move, as the fund dropped about $0.2 million worth. These moves are important to note, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).

Let’s also examine hedge fund activity in other stocks similar to Ascena Retail Group Inc (NASDAQ:ASNA). We will take a look at Sequential Brands Group Inc (NASDAQ:SQBG), Endologix, Inc. (NASDAQ:ELGX), Genetic Technologies Limited (NASDAQ:GENE), and SIFCO Industries, Inc. (NYSE:SIF). This group of stocks’ market caps are closest to ASNA’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
SQBG 3 1742 -1
ELGX 4 1281 -1
GENE 1 321 0
SIF 4 1161 0
Average 3 1126 -0.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 3 hedge funds with bullish positions and the average amount invested in these stocks was $1 million. That figure was $3 million in ASNA’s case. Endologix, Inc. (NASDAQ:ELGX) is the most popular stock in this table. On the other hand Genetic Technologies Limited (NASDAQ:GENE) is the least popular one with only 1 bullish hedge fund positions. Compared to these stocks Ascena Retail Group Inc (NASDAQ:ASNA) 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 13.4% in 2020 through June 22nd but still managed to beat the market by 15.9 percentage points. Hedge funds were also right about betting on ASNA as the stock returned 33.1% so far in Q2 (through June 22nd) 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.

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