At the end of February we announced the arrival of the first US recession since 2009 and we predicted that the market will decline by at least 20% in (see why hell is coming). In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. In this article, we will take a closer look at hedge fund sentiment towards Astec Industries, Inc. (NASDAQ:ASTE) at the end of the first quarter and determine whether the smart money was really smart about this stock.
Is Astec Industries, Inc. (NASDAQ:ASTE) a healthy stock for your portfolio? Prominent investors were turning bullish. The number of bullish hedge fund bets increased by 1 lately. Our calculations also showed that ASTE 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).
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 was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 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’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 36% through May 18th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Phill Gross of Adage Capital Management
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. With all of this in mind we’re going to analyze the fresh hedge fund action regarding Astec Industries, Inc. (NASDAQ:ASTE).
What have hedge funds been doing with Astec Industries, Inc. (NASDAQ:ASTE)?
Heading into the second quarter of 2020, a total of 10 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 11% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards ASTE over the last 18 quarters. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
When looking at the institutional investors followed by Insider Monkey, GAMCO Investors, managed by Mario Gabelli, holds the number one position in Astec Industries, Inc. (NASDAQ:ASTE). GAMCO Investors has a $44.5 million position in the stock, comprising 0.5% of its 13F portfolio. Coming in second is Adage Capital Management, led by Phill Gross and Robert Atchinson, holding a $35 million position; 0.1% of its 13F portfolio is allocated to the company. Other hedge funds and institutional investors that hold long positions contain Chuck Royce’s Royce & Associates, Jeffrey Moskowitz’s Harvey Partners and Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital. In terms of the portfolio weights assigned to each position Harvey Partners allocated the biggest weight to Astec Industries, Inc. (NASDAQ:ASTE), around 5.05% of its 13F portfolio. GAMCO Investors is also relatively very bullish on the stock, dishing out 0.53 percent of its 13F equity portfolio to ASTE.
With a general bullishness amongst the heavyweights, key money managers have jumped into Astec Industries, Inc. (NASDAQ:ASTE) headfirst. Engineers Gate Manager, managed by Greg Eisner, initiated the most valuable position in Astec Industries, Inc. (NASDAQ:ASTE). Engineers Gate Manager had $0.3 million invested in the company at the end of the quarter. Renaissance Technologies also made a $0.3 million investment in the stock during the quarter. The only other fund with a brand new ASTE position is Benjamin A. Smith’s Laurion Capital Management.
Let’s now take a look at hedge fund activity in other stocks similar to Astec Industries, Inc. (NASDAQ:ASTE). These stocks are Meta Financial Group Inc. (NASDAQ:CASH), Sandy Spring Bancorp Inc. (NASDAQ:SASR), Anterix Inc. (NASDAQ:ATEX), and Natus Medical Inc (NASDAQ:NTUS). This group of stocks’ market valuations are closest to ASTE’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| CASH | 13 | 71021 | 1 |
| SASR | 12 | 36542 | -3 |
| ATEX | 11 | 415373 | -1 |
| NTUS | 23 | 72047 | -1 |
| Average | 14.75 | 148746 | -1 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 14.75 hedge funds with bullish positions and the average amount invested in these stocks was $149 million. That figure was $96 million in ASTE’s case. Natus Medical Inc (NASDAQ:NTUS) is the most popular stock in this table. On the other hand Anterix Inc. (NASDAQ:ATEX) is the least popular one with only 11 bullish hedge fund positions. Compared to these stocks Astec Industries, Inc. (NASDAQ:ASTE) is even less popular than ATEX. Hedge funds clearly dropped the ball on ASTE as the stock delivered strong returns, though hedge funds’ consensus picks still generated respectable returns. 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 gained 12.3% in 2020 through June 30th and still beat the market by 15.5 percentage points. A small number of hedge funds were also right about betting on ASTE as the stock returned 32.8% in the second quarter and outperformed the market by an even larger margin.
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Disclosure: None. This article was originally published at Insider Monkey.
