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Did Hedge Funds Make The Right Call On Ashland Global Holdings Inc.. (ASH) ?

We know that hedge funds generate strong, risk-adjusted returns over the long run, which is why imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, professional investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn’t mean that they don’t have occasional colossal losses; they do. However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, let’s examine the smart money sentiment towards Ashland Global Holdings Inc.. (NYSE:ASH) and determine whether hedge funds skillfully traded this stock.

Is Ashland Global Holdings Inc.. (NYSE:ASH) worth your attention right now? Prominent investors were taking an optimistic view. The number of bullish hedge fund positions went up by 2 in recent months. Our calculations also showed that ASH 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). ASH was in 32 hedge funds’ portfolios at the end of the first quarter of 2020. There were 30 hedge funds in our database with ASH positions at the end of the previous quarter.

Video: Watch our video about the top 5 most popular hedge fund stocks.

Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. 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 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.

Leon Cooperman Omega Advisors

Leon Cooperman of Omega Advisors

At Insider Monkey we scour multiple sources to uncover the next great investment idea. There is a lot of volatility in the markets and this presents amazing investment opportunities from time to time. For example, this trader claims to deliver juiced up returns with one trade a week, so we are checking out his highest conviction idea. A second trader claims to score lucrative profits by utilizing a “weekend trading strategy”, so we look into his strategy’s picks. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We recently recommended several stocks partly inspired by legendary Bill Miller’s investor letter. 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. Keeping this in mind we’re going to take a gander at the fresh hedge fund action regarding Ashland Global Holdings Inc.. (NYSE:ASH).

How are hedge funds trading Ashland Global Holdings Inc.. (NYSE:ASH)?

At Q1’s end, a total of 32 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 7% from the fourth quarter of 2019. On the other hand, there were a total of 30 hedge funds with a bullish position in ASH a year ago. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

More specifically, Eminence Capital was the largest shareholder of Ashland Global Holdings Inc.. (NYSE:ASH), with a stake worth $282.2 million reported as of the end of September. Trailing Eminence Capital was Diamond Hill Capital, which amassed a stake valued at $110.5 million. Cruiser Capital Advisors, Omega Advisors, and Empyrean Capital Partners 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 Cruiser Capital Advisors allocated the biggest weight to Ashland Global Holdings Inc.. (NYSE:ASH), around 59.56% of its 13F portfolio. Appian Way Asset Management is also relatively very bullish on the stock, dishing out 5.52 percent of its 13F equity portfolio to ASH.

With a general bullishness amongst the heavyweights, some big names were breaking ground themselves. Empyrean Capital Partners, managed by Michael A. Price and Amos Meron, established the most outsized position in Ashland Global Holdings Inc.. (NYSE:ASH). Empyrean Capital Partners had $26.7 million invested in the company at the end of the quarter. Andrew Byington’s Appian Way Asset Management also initiated a $7.5 million position during the quarter. The following funds were also among the new ASH investors: Paul Marshall and Ian Wace’s Marshall Wace LLP, Robert Pohly’s Samlyn Capital, and David Harding’s Winton Capital Management.

Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Ashland Global Holdings Inc.. (NYSE:ASH) but similarly valued. These stocks are NorthWestern Corporation (NYSE:NWE), Cameco Corporation (NYSE:CCJ), Pan American Silver Corp. (NASDAQ:PAAS), and American States Water Co (NYSE:AWR). This group of stocks’ market caps match ASH’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
NWE 19 125827 0
CCJ 24 267635 -4
PAAS 30 341386 0
AWR 19 50907 -2
Average 23 196439 -1.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 23 hedge funds with bullish positions and the average amount invested in these stocks was $196 million. That figure was $677 million in ASH’s case. Pan American Silver Corp. (NASDAQ:PAAS) is the most popular stock in this table. On the other hand NorthWestern Corporation (NYSE:NWE) is the least popular one with only 19 bullish hedge fund positions. Compared to these stocks Ashland Global Holdings Inc.. (NYSE:ASH) 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 12.3% in 2020 through June 30th but still managed to beat the market by 15.5 percentage points. Hedge funds were also right about betting on ASH as the stock returned 38.6% in Q2 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.