Hedge Funds Are Dumping AdvanSix Inc. (ASIX)

Hedge Funds and other institutional investors have just completed filing their 13Fs with the Securities and Exchange Commission, revealing their equity portfolios as of the end of June. At Insider Monkey, we follow nearly 750 active hedge funds and notable investors and by analyzing their 13F filings, we can determine the stocks that they are collectively bullish on. One of their picks is AdvanSix Inc. (NYSE:ASIX), so let’s take a closer look at the sentiment that surrounds it in the current quarter.

Is AdvanSix Inc. (NYSE:ASIX) going to take off soon? Investors who are in the know are reducing their bets on the stock. The number of long hedge fund bets were trimmed by 5 recently. Our calculations also showed that ASIX isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings). ASIX was in 10 hedge funds’ portfolios at the end of September. There were 15 hedge funds in our database with ASIX holdings at the end of the previous quarter.
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to 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’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the Russell 2000 ETFs by 40 percentage points since May 2014 (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 27.8% through November 21, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

John Overdeck of Two Sigma

John Overdeck of Two Sigma Advisors

We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world’s largest cannabis market, so we check out this European marijuana stock pitch. One of the most bullish analysts in America just put his money where his mouth is. He says, “I’m investing more today than I did back in early 2009.” So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We also rely on the best performing hedge funds‘ buy/sell signals. We’re going to check out the fresh hedge fund action surrounding AdvanSix Inc. (NYSE:ASIX).

How have hedgies been trading AdvanSix Inc. (NYSE:ASIX)?

At Q3’s end, a total of 10 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -33% from one quarter earlier. On the other hand, there were a total of 23 hedge funds with a bullish position in ASIX 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.

The largest stake in AdvanSix Inc. (NYSE:ASIX) was held by Firefly Value Partners, which reported holding $63.6 million worth of stock at the end of September. It was followed by D E Shaw with a $21 million position. Other investors bullish on the company included Renaissance Technologies, Arrowstreet Capital, and Two Sigma Advisors. In terms of the portfolio weights assigned to each position Firefly Value Partners allocated the biggest weight to AdvanSix Inc. (NYSE:ASIX), around 9.75% of its 13F portfolio. Soapstone Capital is also relatively very bullish on the stock, earmarking 1.4 percent of its 13F equity portfolio to ASIX.

Since AdvanSix Inc. (NYSE:ASIX) has witnessed declining sentiment from the aggregate hedge fund industry, it’s easy to see that there lies a certain “tier” of hedge funds that slashed their positions entirely in the third quarter. Intriguingly, Martin Whitman’s Third Avenue Management cut the largest position of all the hedgies watched by Insider Monkey, totaling about $0.8 million in stock. David Harding’s fund, Winton Capital Management, also said goodbye to its stock, about $0.7 million worth. These transactions are interesting, as total hedge fund interest was cut by 5 funds in the third quarter.

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as AdvanSix Inc. (NYSE:ASIX) but similarly valued. We will take a look at Kimball International Inc (NASDAQ:KBAL), C&J Energy Services, Inc (NYSE:CJ), Ready Capital Corporation (NYSE:RC), and Vanda Pharmaceuticals Inc. (NASDAQ:VNDA). This group of stocks’ market caps are closest to ASIX’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
KBAL 12 123697 -1
CJ 18 116969 -3
RC 4 40767 -2
VNDA 18 187961 0
Average 13 117349 -1.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 13 hedge funds with bullish positions and the average amount invested in these stocks was $117 million. That figure was $115 million in ASIX’s case. C&J Energy Services, Inc (NYSE:CJ) is the most popular stock in this table. On the other hand Ready Capital Corporation (NYSE:RC) is the least popular one with only 4 bullish hedge fund positions. AdvanSix Inc. (NYSE:ASIX) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately ASIX wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); ASIX investors were disappointed as the stock returned -21.3% during the first two months of the fourth quarter and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as 70 percent of these stocks already outperformed the market in Q4.

Disclosure: None. This article was originally published at Insider Monkey.