Is A. Schulman Inc (SHLM) A Good Stock To Buy?

Reputable billionaire investors such as Nelson Peltz and David Tepper generate exorbitant profits for their wealthy accredited investors (a minimum of $1 million in investable assets would be required to invest in a hedge fund and most successful hedge funds won’t accept your savings unless you commit at least $5 million) by pinpointing winning small-cap stocks. There is little or no publicly-available information at all on some of these small companies, which makes it hard for an individual investor to pin down a winner within the small-cap space. However, hedge funds and other big asset managers can do the due diligence and analysis for you instead, thanks to their highly-skilled research teams and vast resources to conduct an appropriate evaluation process. Looking for potential winners within the small-cap galaxy of stocks? We believe following the smart money is a good starting point.

A. Schulman Inc (NASDAQ:SHLM) shareholders have witnessed a decrease in support from the world’s most successful money managers of late. There were 11 hedge funds in our database with SHLM holdings at the end of September. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Duluth Holdings Inc (NASDAQ:DLTH), Air Transport Services Group Inc. (NASDAQ:ATSG), and Universal Health Realty Income Trust (NYSE:UHT) to gather more data points.

We follow over 700 hedge funds and other institutional investors and by analyzing their quarterly 13F filings, we identify stocks that they are collectively bullish on and develop investment strategies based on this data. One strategy that outperformed the market over the last year involves selecting the 100 best-performing funds and identifying the 30 mid-cap stocks that they are collectively most bullish on. Over the past year, this strategy generated returns of 18%, topping the 8% gain registered by S&P 500 ETFs. We launched this strategy 2.5 years ago and it returned more than 39% since then, vs. 22% gain registered by the S&P 500 ETFs.

With all of this in mind, we’re going to view the latest action regarding A. Schulman Inc (NASDAQ:SHLM).

Hedge fund activity in A. Schulman Inc (NASDAQ:SHLM)

At Q3’s end, a total of 11 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -31% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards SHLM over the last 5 quarters. With hedgies’ positions undergoing their usual ebb and flow, there exists a select group of notable hedge fund managers who were upping their holdings meaningfully (or already accumulated large positions).

When looking at the institutional investors followed by Insider Monkey, Daruma Asset Management, led by Mariko Gordon, holds the largest position in A. Schulman Inc (NASDAQ:SHLM). Daruma Asset Management has a $55.9 million position in the stock, comprising 3.4% of its 13F portfolio. On Daruma Asset Management’s heels is James A. Mitarotonda of Barington Capital Group, with a $9.4 million position; the fund has 7.7% of its 13F portfolio invested in the stock. Remaining professional money managers with similar optimism comprise Chuck Royce’s Royce & Associates, Roger Ibbotson’s Zebra Capital Management and Mario Gabelli’s GAMCO Investors. We should note that none of these elite funds are among our list of the 100 best performing elite funds which is based on the performance of their 13F long positions in non-microcap stocks.

Now that we’ve mentioned the most bullish investors, let’s also take a look at some funds that said goodbye to their entire stakes in the stock during the third quarter. Interestingly, Millennium Management, one of the 10 largest hedge funds in the world, said goodbye to the largest position of all the hedgies followed by Insider Monkey, worth close to $6 million in stock. Ira Unschuld’s fund, Brant Point Investment Management, also said goodbye to its stock, about $3.6 million worth.

Let’s also examine hedge fund activity in other stocks similar to A. Schulman Inc (NASDAQ:SHLM). These stocks are Duluth Holdings Inc (NASDAQ:DLTH), Air Transport Services Group Inc. (NASDAQ:ATSG), Universal Health Realty Income Trust (NYSE:UHT), and Caretrus REIT Inc (NASDAQ:CTRE). This group of stocks’ market caps resemble SHLM’s market cap.

As you can see these stocks had an average of 10.25 hedge funds with bullish positions and the average amount invested in these stocks was $90 million. That figure was $77 million in SHLM’s case. Air Transport Services Group Inc. (NASDAQ:ATSG) is the most popular stock in this table. On the other hand Universal Health Realty Income Trust (NYSE:UHT) is the least popular one with only 5 bullish hedge fund positions. A. Schulman Inc (NASDAQ:SHLM) 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 ATSG might be a better candidate to consider taking a long position in.

Disclosure: None