We have been waiting for this for a year and finally the third quarter ended up showing a nice bump in the performance of small-cap stocks. Both the S&P 500 and Russell 2000 were up since the end of the second quarter, but small-cap stocks outperformed the large-cap stocks by double digits. This is important for hedge funds, which are big supporters of small-cap stocks, because their investors started pulling some of their capital out due to poor recent performance. It is very likely that equity hedge funds will deliver better risk adjusted returns in the second half of this year. In this article we are going to look at how this recent market trend affected the sentiment of hedge funds towards Albemarle Corporation (NYSE:ALB), and what that likely means for the prospects of the company and its stock.
Is Albemarle Corporation (NYSE:ALB) worth your attention right now? Prominent investors are turning less bullish. The number of long hedge fund positions dropped by 2 lately. At the end of this article we will also compare ALB to other stocks including Fortune Brands Home & Security Inc (NYSE:FBHS), CBRE Group Inc (NYSE:CBG), and ResMed Inc. (NYSE:RMD) to get a better sense of its popularity.
At Insider Monkey, we’ve developed an investment strategy that has delivered market-beating returns over the past 12 months. Our strategy identifies the 100 best-performing funds of the previous quarter from among the collection of 700+ successful funds that we track in our database, which we accomplish using our returns methodology. We then study the portfolios of those 100 funds using the latest 13F data to uncover the 30 most popular mid-cap stocks (market caps of between $1 billion and $10 billion) among them to hold until the next filing period. This strategy delivered 18% gains over the past 12 months, more than doubling the 8% returns enjoyed by the S&P 500 ETFs.
Keeping this in mind, let’s check out the new action surrounding Albemarle Corporation (NYSE:ALB).
What does the smart money think about Albemarle Corporation (NYSE:ALB)?
Heading into the fourth quarter of 2016, a total of 38 of the hedge funds tracked by Insider Monkey were bullish on this stock, a 5% decline from the second quarter of 2016, which followed a sharp increase. With hedgies’ positions undergoing their usual ebb and flow, there exists a select group of notable hedge fund managers who were increasing their stakes meaningfully (or already accumulated large positions).
According to Insider Monkey’s hedge fund database, Iridian Asset Management, managed by David Cohen and Harold Levy, holds the largest position in Albemarle Corporation (NYSE:ALB). Iridian Asset Management has a $203.4 million position in the stock, comprising 1.8% of its 13F portfolio. The second most bullish fund manager is Egerton Capital Limited, led by John Armitage, holding a $127.4 million position; 1.4% of its 13F portfolio is allocated to the stock. Remaining hedge funds and institutional investors that hold long positions consist of Robert Polak’s Anchor Bolt Capital, Christopher A. Winham’s Tide Point Capital and Principal Global Investors’s Columbus Circle Investors.
Because Albemarle Corporation (NYSE:ALB) has faced a decline in interest from the aggregate hedge fund industry, it’s safe to say that there were a few hedgies who sold off their full holdings by the end of the third quarter. Interestingly, Bain Capital’s Brookside Capital dropped the largest investment of the 700 funds watched by Insider Monkey, totaling about $82.5 million in call options. Christopher A. Winham’s fund, Tide Point Capital, also sold off its call options, about $59.5 million worth. These transactions are interesting, as total hedge fund interest fell by 2 funds by the end of the third quarter.
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Albemarle Corporation (NYSE:ALB) but similarly valued. These stocks are Fortune Brands Home & Security Inc (NYSE:FBHS), CBRE Group Inc (NYSE:CBG), ResMed Inc. (NYSE:RMD), and Shaw Communications Inc (USA) (NYSE:SJR). This group of stocks’ market valuations are closest to ALB’s market valuation.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
As you can see these stocks had an average of 21.25 hedge funds with bullish positions and the average amount invested in these stocks was $636 million. That figure was $883 million in ALB’s case. CBRE Group Inc (NYSE:CBG) is the most popular stock in this table. On the other hand Shaw Communications Inc (USA) (NYSE:SJR) is the least popular one with only 9 bullish hedge fund positions. Compared to these stocks Albemarle Corporation (NYSE:ALB) 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.