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Here is What Hedge Funds Think About AdvanSix Inc. (NYSE:ASIX)

We can judge whether AdvanSix Inc. (NYSE:ASIX) is a good investment right now by following the lead of some of the best investors in the world and piggybacking their ideas. There’s no better way to get these firms’ immense resources and analytical capabilities working for us than to follow their lead into their best ideas. While not all of these picks will be winners, research shows that these picks historically outperformed the market when we factor in known risk factors.

Is AdvanSix Inc. (NYSE:ASIX) a healthy stock for your portfolio? The smart money is becoming more confident. The number of bullish hedge fund bets rose by 5 recently, and therefore, the company was in 23 hedge funds’ portfolios at the end of September. Still, that number wasn’t enough for the company to be considered one of the 30 most popular stocks among hedge funds in Q3 of 2018. Nevertheless, we are still interested in analyzing this stock further in the article.

If you’d ask most stock holders, hedge funds are perceived as underperforming, outdated financial vehicles of yesteryear. While there are more than 8000 funds with their doors open at the moment, We choose to focus on the masters of this group, approximately 700 funds. It is estimated that this group of investors preside over the majority of the hedge fund industry’s total capital, and by tracking their inimitable stock picks, Insider Monkey has discovered many investment strategies that have historically outrun the broader indices. Insider Monkey’s flagship hedge fund strategy exceeded the S&P 500 index by 6 percentage points per year since its inception in May 2014 through early November 2018. We were able to generate large returns even by identifying short candidates. Our portfolio of short stocks lost 26.1% since February 2017 even though the market was up nearly 19% during the same period. We just shared a list of 11 short targets in our latest quarterly update.

D. E. Shaw

While investigating about the stock, we stumbled upon this Third Avenue Small-Cap Value Fund’s Portfolio Manager Commentary, in which this investment manager discusses the stock. Third Avenue Management was one of the largest new shareholders of the company.  Here is that part of the report:

“AdvanSix is unique among peers in that it owns hard assets on the US East Coast that are vertically integrated, allowing the company to maintain a structurally advantaged position in which it is the lowest-cost producer globally. In addition to its low profile being a spinoff, the company has also faced headwinds to its operations this year that have weighed on its short-term earnings and the price of its stock. This helped create the opportunity for us to purchase shares at a discount to net asset value and a large discount to the replacement costs for the company’s unique assets. Additionally, the company is creditworthy and operated by a tenured management team which oversaw the same assets for a long period prior to AdvanSix becoming an independent public company. We’ve had a chance to meet with management and are encouraged that the team is thoughtfully reinvesting the company’s ample cash flows back into high-return organic growth opportunities as well as opportunistic share repurchases, while maintaining a strong balance sheet.“

Let’s take a gander at the recent hedge fund action surrounding AdvanSix Inc. (NYSE:ASIX).

What have hedge funds been doing with AdvanSix Inc. (NYSE:ASIX)?

Heading into the fourth quarter of 2018, a total of 23 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 28% from one quarter earlier. By comparison, 20 hedge funds held shares or bullish call options in ASIX heading into this year. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

ASIX_nov2018

More specifically, Firefly Value Partners was the largest shareholder of AdvanSix Inc. (NYSE:ASIX), with a stake worth $74.9 million reported as of the end of September. Trailing Firefly Value Partners was D E Shaw, which amassed a stake valued at $22.9 million. AQR Capital Management, Two Sigma Advisors, and Soapstone Capital were also very fond of the stock, giving the stock large weights in their portfolios.

With a general bullishness amongst the heavyweights, specific money managers have jumped into AdvanSix Inc. (NYSE:ASIX) headfirst. Third Avenue Management, managed by Martin Whitman, initiated the largest position in AdvanSix Inc. (NYSE:ASIX). Third Avenue Management had $2.6 million invested in the company at the end of the quarter. Peter Algert and Kevin Coldiron’s Algert Coldiron Investors also initiated a $1.7 million position during the quarter. The other funds with brand new ASIX positions are Andre F. Perold’s HighVista Strategies, Paul Marshall and Ian Wace’s Marshall Wace LLP, and Jim Simons’s Renaissance Technologies.

Let’s also examine 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 Athenex, Inc. (NASDAQ:ATNX), Health Insurance Innovations Inc (NASDAQ:HIIQ), Karyopharm Therapeutics Inc (NASDAQ:KPTI), and New Mountain Finance Corp. (NYSE:NMFC). This group of stocks’ market caps match ASIX’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
ATNX 7 63307 1
HIIQ 17 259590 -4
KPTI 18 216629 4
NMFC 12 20113 1

As you can see these stocks had an average of 14 hedge funds with bullish positions and the average amount invested in these stocks was $140 million. That figure was $156 million in ASIX’s case. Karyopharm Therapeutics Inc (NASDAQ:KPTI) is the most popular stock in this table. On the other hand Athenex, Inc. (NASDAQ:ATNX) is the least popular one with only 7 bullish hedge fund positions. Compared to these stocks AdvanSix Inc. (NYSE:ASIX) is more popular among hedge funds. Considering that hedge funds are fond of this stock in relation to its market cap peers, it may be a good idea to analyze it in detail and potentially include it in your portfolio.

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

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