World-class money managers like Ken Griffin and Barry Rosenstein only invest their wealthy clients’ money after undertaking a rigorous examination of any potential stock. They are particularly successful in this regard when it comes to small-cap stocks, which their peerless research gives them a big information advantage on when it comes to judging their worth. It’s not surprising then that they generate their biggest returns from these stocks and invest more of their money in these stocks on average than other investors. It’s also not surprising then that we pay close attention to these picks ourselves and have built a market-beating investment strategy around them.
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 market by 18 percentage points since May 2014 through December 3, 2018 (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.
We’re going to view the latest hedge fund action encompassing Actuant Corporation (NYSE:ATU).
How have hedgies been trading Actuant Corporation (NYSE:ATU)?
At the end of the third quarter, a total of 16 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 60% from the second quarter of 2018. By comparison, 11 hedge funds held shares or bullish call options in ATU heading into this year. With hedgies’ capital changing hands, there exists a select group of notable hedge fund managers who were boosting their stakes substantially (or already accumulated large positions).
More specifically, Southeastern Asset Management was the largest shareholder of Actuant Corporation (NYSE:ATU), with a stake worth $164.6 million reported as of the end of September. Trailing Southeastern Asset Management was Pzena Investment Management, which amassed a stake valued at $120.9 million. Cove Street Capital, Millennium Management, and Balyasny Asset Management were also very fond of the stock, giving the stock large weights in their portfolios.
As industrywide interest jumped, key hedge funds have jumped into Actuant Corporation (NYSE:ATU) headfirst. Balyasny Asset Management, managed by Dmitry Balyasny, assembled the biggest position in Actuant Corporation (NYSE:ATU). Balyasny Asset Management had $5.6 million invested in the company at the end of the quarter. Joel Greenblatt’s Gotham Asset Management also initiated a $1.7 million position during the quarter. The other funds with new positions in the stock are Jim Simons’s Renaissance Technologies, Paul Marshall and Ian Wace’s Marshall Wace LLP, and Ken Griffin’s Citadel Investment Group.
Let’s also examine hedge fund activity in other stocks similar to Actuant Corporation (NYSE:ATU). These stocks are Calavo Growers, Inc. (NASDAQ:CVGW), MRC Global Inc (NYSE:MRC), Qudian Inc. (NYSE:QD), and Adams Diversified Equity Fund, Inc. (NYSE:ADX). This group of stocks’ market values are similar to ATU’s market value.
|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 9.5 hedge funds with bullish positions and the average amount invested in these stocks was $68 million. That figure was $326 million in ATU’s case. MRC Global Inc (NYSE:MRC) is the most popular stock in this table. On the other hand 0 is the least popular one with only 3 bullish hedge fund positions. Actuant Corporation (NYSE:ATU) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. In this regard MRC might be a better candidate to consider a long position.
Disclosure: None. This article was originally published at Insider Monkey.