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Hedge Funds Are Warming Up To Albemarle Corporation (ALB) Again

In this article you are going to find out whether hedge funds think Albemarle Corporation (NYSE:ALB) is a good investment right now. We like to check what the smart money thinks first before doing extensive research on a given stock. Although there have been several high profile failed hedge fund picks, the consensus picks among hedge fund investors have historically outperformed the market after adjusting for known risk attributes. It’s not surprising given that hedge funds have access to better information and more resources to predict the winners in the stock market.

Albemarle Corporation (NYSE:ALB) investors should be aware of an increase in support from the world’s most elite money managers lately. ALB was in 24 hedge funds’ portfolios at the end of the first quarter of 2020. There were 23 hedge funds in our database with ALB holdings at the end of the previous quarter. Our calculations also showed that ALB 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 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 S&P 500 ETFs by 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 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.

Jonathan Barrett Luminus Management

Jonathan Barrett of Luminus Management

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, 2020’s unprecedented market conditions provide us with the highest number of trading opportunities in a decade. So we are checking out trades like this one. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind let’s take a look at the recent hedge fund action encompassing Albemarle Corporation (NYSE:ALB).

Hedge fund activity in Albemarle Corporation (NYSE:ALB)

At the end of the first quarter, a total of 24 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 4% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards ALB over the last 18 quarters. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

More specifically, Luminus Management was the largest shareholder of Albemarle Corporation (NYSE:ALB), with a stake worth $25.4 million reported as of the end of September. Trailing Luminus Management was Citadel Investment Group, which amassed a stake valued at $18.8 million. Millennium Management, Royce & Associates, and ZWEIG DIMENNA PARTNERS were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Luminus Management allocated the biggest weight to Albemarle Corporation (NYSE:ALB), around 2.62% of its 13F portfolio. Sandbar Asset Management is also relatively very bullish on the stock, setting aside 2.62 percent of its 13F equity portfolio to ALB.

As industrywide interest jumped, specific money managers have jumped into Albemarle Corporation (NYSE:ALB) headfirst. Luminus Management, managed by Jonathan Barrett and Paul Segal, established the largest position in Albemarle Corporation (NYSE:ALB). Luminus Management had $25.4 million invested in the company at the end of the quarter. Joe DiMenna’s ZWEIG DIMENNA PARTNERS also made a $4.9 million investment in the stock during the quarter. The other funds with brand new ALB positions are Michael Cowley’s Sandbar Asset Management, Dmitry Balyasny’s Balyasny Asset Management, and Michael Gelband’s ExodusPoint Capital.

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Albemarle Corporation (NYSE:ALB) but similarly valued. These stocks are Vail Resorts, Inc. (NYSE:MTN), Snap-on Incorporated (NYSE:SNA), Gaming and Leisure Properties Inc (NASDAQ:GLPI), and Newell Brands Inc. (NASDAQ:NWL). All of these stocks’ market caps match ALB’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
MTN 37 579984 4
SNA 26 285106 -1
GLPI 35 475226 6
NWL 24 1004534 -7
Average 30.5 586213 0.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 30.5 hedge funds with bullish positions and the average amount invested in these stocks was $586 million. That figure was $73 million in ALB’s case. Vail Resorts, Inc. (NYSE:MTN) is the most popular stock in this table. On the other hand Newell Brands Inc. (NASDAQ:NWL) is the least popular one with only 24 bullish hedge fund positions. Compared to these stocks Albemarle Corporation (NYSE:ALB) is even less popular than NWL. Hedge funds clearly dropped the ball on ALB 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 13.9% in 2020 through June 10th and still beat the market by 14.2 percentage points. A small number of hedge funds were also right about betting on ALB as the stock returned 48.8% so far 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.