Ashland Inc. (ASH): Hedge Funds Are Bullish and Insiders Are Bearish, What Should You Do?

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Ashland Inc. (NYSE:ASH) shareholders have witnessed an increase in activity from the world’s largest hedge funds recently.

Ashland Inc

If you’d ask most market participants, hedge funds are assumed to be slow, old financial tools of years past. While there are more than 8000 funds in operation today, we choose to focus on the aristocrats of this group, about 450 funds. It is estimated that this group controls the lion’s share of all hedge funds’ total capital, and by monitoring their top stock picks, we have deciphered a number of investment strategies that have historically outpaced the broader indices. Our small-cap hedge fund strategy outstripped the S&P 500 index by 18 percentage points annually for a decade in our back tests, and since we’ve began to sharing our picks with our subscribers at the end of August 2012, we have outclassed the S&P 500 index by 23.3 percentage points in 8 months (see all of our picks from August).

Equally as integral, optimistic insider trading activity is a second way to break down the financial markets. Obviously, there are plenty of stimuli for an insider to cut shares of his or her company, but only one, very simple reason why they would initiate a purchase. Several academic studies have demonstrated the valuable potential of this tactic if you know what to do (learn more here).

Now, we’re going to take a gander at the recent action regarding Ashland Inc. (NYSE:ASH).

What does the smart money think about Ashland Inc. (NYSE:ASH)?

At Q1’s end, a total of 32 of the hedge funds we track held long positions in this stock, a change of 10% from the first quarter. With hedge funds’ sentiment swirling, there exists a select group of key hedge fund managers who were boosting their holdings considerably.

Of the funds we track, JANA Partners, managed by Barry Rosenstein, holds the most valuable position in Ashland Inc. (NYSE:ASH). JANA Partners has a $271 million position in the stock, comprising 5.6% of its 13F portfolio. On JANA Partners’s heels is Atlantic Investment Management, managed by Alexander Roepers, which held a $185.5 million position; 17% of its 13F portfolio is allocated to the company. Some other peers that are bullish include Ralph V. Whitworth’s Relational Investors, Jeffrey Gates’s Gates Capital Management and Doug Silverman and Alexander Klabin’s Senator Investment Group.

As one would reasonably expect, specific money managers were leading the bulls’ herd. JANA Partners, managed by Barry Rosenstein, initiated the most outsized position in Ashland Inc. (NYSE:ASH). JANA Partners had 271 million invested in the company at the end of the quarter. Keith Meister’s Corvex Capital also made a $31.5 million investment in the stock during the quarter. The other funds with new positions in the stock are Neil Chriss’s Hutchin Hill Capital, Barry Rosenstein’s JANA Partners, and Paul Marshall and Ian Wace’s Marshall Wace LLP.

What have insiders been doing with Ashland Inc. (NYSE:ASH)?

Insider purchases made by high-level executives is most useful when the primary stock in question has seen transactions within the past 180 days. Over the latest 180-day time period, Ashland Inc. (NYSE:ASH) has experienced zero unique insiders purchasing, and 4 insider sales (see the details of insider trades here).

Let’s also examine hedge fund and insider activity in other stocks similar to Ashland Inc. (NYSE:ASH). These stocks are FMC Corp (NYSE:FMC), Huntsman Corporation (NYSE:HUN), Celanese Corporation (NYSE:CE), Braskem SA (ADR) (NYSE:BAK), and Valhi, Inc. (NYSE:VHI). This group of stocks are in the chemicals – major diversified industry and their market caps resemble ASH’s market cap.

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