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). We reversed our stance on March 25th after seeing unprecedented fiscal and monetary stimulus unleashed by the Fed and the Congress. This is the perfect market for stock pickers, now that the stocks are fully valued again. 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 Associated Banc Corp (NYSE:ASB) at the end of the second quarter and determine whether the smart money was really smart about this stock.
Is Associated Banc Corp (NYSE:ASB) the right investment to pursue these days? Hedge funds were becoming more confident. The number of bullish hedge fund bets rose by 6 lately. Associated Banc Corp (NYSE:ASB) was in 22 hedge funds’ portfolios at the end of the second quarter of 2020. The all time high for this statistics is 24. Our calculations also showed that ASB isn’t among the 30 most popular stocks among hedge funds (click for Q2 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.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 56 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 34% through August 17th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost precious metals prices. So, we are checking out this lithium company which could also benefit from the electric car adoption. We go through lists like the 10 most profitable companies in the world to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our website to get excerpts of these letters in your inbox. With all of this in mind let’s take a gander at the new hedge fund action encompassing Associated Banc Corp (NYSE:ASB).
How have hedgies been trading Associated Banc Corp (NYSE:ASB)?
Heading into the third quarter of 2020, a total of 22 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 38% from the first quarter of 2020. Below, you can check out the change in hedge fund sentiment towards ASB over the last 20 quarters. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Richard S. Pzena’s Pzena Investment Management has the largest position in Associated Banc Corp (NYSE:ASB), worth close to $41.6 million, corresponding to 0.3% of its total 13F portfolio. Sitting at the No. 2 spot is AQR Capital Management, managed by Cliff Asness, which holds a $26.3 million position; less than 0.1%% of its 13F portfolio is allocated to the stock. Other professional money managers that are bullish include Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital, Israel Englander’s Millennium Management and Ken Griffin’s Citadel Investment Group. In terms of the portfolio weights assigned to each position Pzena Investment Management allocated the biggest weight to Associated Banc Corp (NYSE:ASB), around 0.27% of its 13F portfolio. AlphaCrest Capital Management is also relatively very bullish on the stock, earmarking 0.06 percent of its 13F equity portfolio to ASB.
As aggregate interest increased, some big names have been driving this bullishness. Fisher Asset Management, managed by Ken Fisher, created the biggest position in Associated Banc Corp (NYSE:ASB). Fisher Asset Management had $2.6 million invested in the company at the end of the quarter. Michael Gelband’s ExodusPoint Capital also made a $1.9 million investment in the stock during the quarter. The other funds with brand new ASB positions are Benjamin A. Smith’s Laurion Capital Management, Brandon Haley’s Holocene Advisors, and Thomas Bailard’s Bailard Inc.
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Associated Banc Corp (NYSE:ASB) but similarly valued. We will take a look at Cronos Group Inc. (NASDAQ:CRON), Helmerich & Payne, Inc. (NYSE:HP), Piedmont Office Realty Trust, Inc. (NYSE:PDM), Laureate Education, Inc. (NASDAQ:LAUR), Cathay General Bancorp (NASDAQ:CATY), Cabot Corporation (NYSE:CBT), and Alcoa Corporation (NYSE:AA). All of these stocks’ market caps match ASB’s market cap.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
View table here if you experience formatting issues.
As you can see these stocks had an average of 21.6 hedge funds with bullish positions and the average amount invested in these stocks was $137 million. That figure was $143 million in ASB’s case. Helmerich & Payne, Inc. (NYSE:HP) is the most popular stock in this table. On the other hand Piedmont Office Realty Trust, Inc. (NYSE:PDM) is the least popular one with only 11 bullish hedge fund positions. Associated Banc Corp (NYSE:ASB) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for ASB is 62.5. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. 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 24.8% in 2020 through the end of September and beat the market by 19.3 percentage points. Unfortunately ASB wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on ASB were disappointed as the stock returned -6.5% in Q3 and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.
Disclosure: None. This article was originally published at Insider Monkey.