We at Insider Monkey have gone over 817 13F filings that hedge funds and prominent 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 funds think of Ardagh Group S.A. (NYSE:ARD) based on that data.
Is ARD a good stock to buy now? Ardagh Group S.A. (NYSE:ARD) shares haven’t seen a lot of action during the second quarter. Overall, hedge fund sentiment was unchanged. The stock was in 7 hedge funds’ portfolios at the end of September. Our calculations also showed that ARD isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video for a quick look at the top 5 stocks). 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 I-Mab (NASDAQ:IMAB), Louisiana-Pacific Corporation (NYSE:LPX), and Power Integrations Inc (NASDAQ:POWI) to gather more data points.
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 66 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.
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 5 best cheap stocks to buy according to Ray Dalio to identify stocks with upside potential. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our website. Now we’re going to take a peek at the latest hedge fund action regarding Ardagh Group S.A. (NYSE:ARD).
How have hedgies been trading Ardagh Group S.A. (NYSE:ARD)?
At Q3’s end, a total of 7 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 0% from one quarter earlier. On the other hand, there were a total of 12 hedge funds with a bullish position in ARD a year ago. With the smart money’s sentiment swirling, there exists an “upper tier” of noteworthy hedge fund managers who were upping their stakes substantially (or already accumulated large positions).
When looking at the institutional investors followed by Insider Monkey, Canyon Capital Advisors, managed by Joshua Friedman and Mitchell Julis, holds the most valuable position in Ardagh Group S.A. (NYSE:ARD). Canyon Capital Advisors has a $40.8 million position in the stock, comprising 1.5% of its 13F portfolio. The second largest stake is held by Renaissance Technologies, which holds a $14.1 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Remaining professional money managers that hold long positions include Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital, Israel Englander’s Millennium Management and Ken Griffin’s Citadel Investment Group. In terms of the portfolio weights assigned to each position Canyon Capital Advisors allocated the biggest weight to Ardagh Group S.A. (NYSE:ARD), around 1.52% of its 13F portfolio. Renaissance Technologies is also relatively very bullish on the stock, dishing out 0.01 percent of its 13F equity portfolio to ARD.
Earlier we told you that the aggregate hedge fund interest in the stock was unchanged and we view this as a negative development. Even though there weren’t any hedge funds dumping their holdings during the third quarter, there weren’t any hedge funds initiating brand new positions. This indicates that hedge funds, at the very best, perceive this stock as dead money and they haven’t identified any viable catalysts that can attract investor attention.
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Ardagh Group S.A. (NYSE:ARD) but similarly valued. We will take a look at I-Mab (NASDAQ:IMAB), Louisiana-Pacific Corporation (NYSE:LPX), Power Integrations Inc (NASDAQ:POWI), Companhia Brasileira de Distrib. (NYSE:CBD), New Residential Investment Corp (NYSE:NRZ), EQT Corporation (NYSE:EQT), and Granite Real Estate Investment Trust (NYSE:GRP). This group of stocks’ market caps are similar to ARD’s market cap.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
View table here if you experience formatting issues.
As you can see these stocks had an average of 20.6 hedge funds with bullish positions and the average amount invested in these stocks was $185 million. That figure was $57 million in ARD’s case. Louisiana-Pacific Corporation (NYSE:LPX) is the most popular stock in this table. On the other hand Granite Real Estate Investment Trust (NYSE:GRP) is the least popular one with only 6 bullish hedge fund positions. Ardagh Group S.A. (NYSE:ARD) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for ARD is 17.5. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 31.6% in 2020 through December 2nd and still beat the market by 16 percentage points. A small number of hedge funds were also right about betting on ARD as the stock returned 28.7% since the end of the third quarter (through 12/2) and outperformed the market by an even larger margin.
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Disclosure: None. This article was originally published at Insider Monkey.