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Hedge Funds Are Souring On Advanced Disposal Services, Inc. (ADSW)

The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We at Insider Monkey have plowed through 752 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds’ and investors’ portfolio positions as of September 30th. In this article we look at what those investors think of Advanced Disposal Services, Inc. (NYSE:ADSW).

Advanced Disposal Services, Inc. (NYSE:ADSW) shareholders have witnessed a decrease in support from the world’s most elite money managers recently. ADSW was in 24 hedge funds’ portfolios at the end of the third quarter of 2019. There were 26 hedge funds in our database with ADSW holdings at the end of the previous quarter. Our calculations also showed that ADSW isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings).
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to 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 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.

James Dondero Highland Capital Management

James Dondero of Highland Capital Management

Unlike the largest US hedge funds that are convinced Dow will soar past 40,000 or the world’s most bearish hedge fund that’s more convinced than ever that a crash is coming, our long-short investment strategy doesn’t rely on bull or bear markets to deliver double digit returns. We only rely on the best performing hedge funds‘ buy/sell signals. We’re going to view the recent hedge fund action regarding Advanced Disposal Services, Inc. (NYSE:ADSW).

How have hedgies been trading Advanced Disposal Services, Inc. (NYSE:ADSW)?

Heading into the fourth quarter of 2019, a total of 24 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -8% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards ADSW over the last 17 quarters. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

ADSW_dec2019

When looking at the institutional investors followed by Insider Monkey, Matthew Halbower’s Pentwater Capital Management has the most valuable position in Advanced Disposal Services, Inc. (NYSE:ADSW), worth close to $109.1 million, comprising 1.7% of its total 13F portfolio. The second most bullish fund manager is Alec Litowitz and Ross Laser of Magnetar Capital, with a $107.8 million position; the fund has 2.7% of its 13F portfolio invested in the stock. Some other hedge funds and institutional investors that hold long positions include Robert Emil Zoellner’s Alpine Associates, John Orrico’s Water Island Capital and Israel Englander’s Millennium Management. In terms of the portfolio weights assigned to each position Havens Advisors allocated the biggest weight to Advanced Disposal Services, Inc. (NYSE:ADSW), around 7.2% of its portfolio. Water Island Capital is also relatively very bullish on the stock, dishing out 5.46 percent of its 13F equity portfolio to ADSW.

Seeing as Advanced Disposal Services, Inc. (NYSE:ADSW) has witnessed falling interest from the smart money, it’s safe to say that there is a sect of hedgies that slashed their full holdings heading into Q4. At the top of the heap, Nick Niell’s Arrowgrass Capital Partners cut the biggest stake of all the hedgies followed by Insider Monkey, valued at close to $2.4 million in stock, and Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital was right behind this move, as the fund sold off about $1.8 million worth. These transactions are interesting, as aggregate hedge fund interest dropped by 2 funds heading into Q4.

Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Advanced Disposal Services, Inc. (NYSE:ADSW) but similarly valued. We will take a look at Magnolia Oil & Gas Corporation (NYSE:MGY), BlackBerry Limited (NYSE:BB), Novanta Inc. (NASDAQ:NOVT), and Colliers International Group Inc (NASDAQ:CIGI). This group of stocks’ market caps are closest to ADSW’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
MGY 17 132628 -2
BB 28 401792 3
NOVT 9 46032 -4
CIGI 11 714194 1
Average 16.25 323662 -0.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 16.25 hedge funds with bullish positions and the average amount invested in these stocks was $324 million. That figure was $668 million in ADSW’s case. BlackBerry Limited (NYSE:BB) is the most popular stock in this table. On the other hand Novanta Inc. (NASDAQ:NOVT) is the least popular one with only 9 bullish hedge fund positions. Advanced Disposal Services, Inc. (NYSE:ADSW) 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. 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 ADSW wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on ADSW were disappointed as the stock returned 1.2% during the fourth quarter (through the end of November) 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 many of these stocks already outperformed the market so far this year.

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

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