At Insider Monkey, we pore over the filings of nearly 817 top investment firms every quarter, a process we have now completed for the latest reporting period. The data we’ve gathered as a result gives us access to a wealth of collective knowledge based on these firms’ portfolio holdings as of September 30. In this article, we will use that wealth of knowledge to determine whether or not Ares Management Corp (NYSE:ARES) makes for a good investment right now.
Is ARES a good stock to buy now? The smart money was cutting their exposure. The number of bullish hedge fund positions shrunk by 4 in recent months. Ares Management Corp (NYSE:ARES) was in 16 hedge funds’ portfolios at the end of September. The all time high for this statistic is 20. Our calculations also showed that ARES 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). There were 20 hedge funds in our database with ARES holdings at the end of June.
Video: Watch our video about the top 5 most popular hedge fund stocks.
To most traders, hedge funds are perceived as underperforming, old financial vehicles of years past. While there are greater than 8000 funds in operation at the moment, Our experts hone in on the bigwigs of this club, approximately 850 funds. These investment experts control the lion’s share of all hedge funds’ total asset base, and by watching their inimitable picks, Insider Monkey has determined various investment strategies that have historically outperformed the market. Insider Monkey’s flagship short hedge fund strategy beat the S&P 500 short ETFs by around 20 percentage points a year since its inception in March 2017. Our portfolio of short stocks lost 13% since February 2017 (through November 17th) even though the market was up 65% during the same period. We just shared a list of 6 short targets in our latest quarterly update .
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 15 best blue chip stocks to pick the best large-cap stocks to buy. 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 let’s review the fresh hedge fund action encompassing Ares Management Corp (NYSE:ARES).
Do Hedge Funds Think ARES Is A Good Stock To Buy Now?
Heading into the fourth quarter of 2020, a total of 16 of the hedge funds tracked by Insider Monkey were long this stock, a change of -20% from the second quarter of 2020. By comparison, 17 hedge funds held shares or bullish call options in ARES a year ago. With hedgies’ capital changing hands, there exists a select group of noteworthy hedge fund managers who were upping their stakes meaningfully (or already accumulated large positions).
The largest stake in Ares Management Corp (NYSE:ARES) was held by HMI Capital, which reported holding $233.7 million worth of stock at the end of September. It was followed by Royce & Associates with a $63.6 million position. Other investors bullish on the company included Junto Capital Management, Citadel Investment Group, and Millennium Management. In terms of the portfolio weights assigned to each position HMI Capital allocated the biggest weight to Ares Management Corp (NYSE:ARES), around 9.68% of its 13F portfolio. Becker Drapkin Management is also relatively very bullish on the stock, designating 3.15 percent of its 13F equity portfolio to ARES.
Due to the fact that Ares Management Corp (NYSE:ARES) has faced falling interest from hedge fund managers, it’s safe to say that there was a specific group of fund managers that slashed their entire stakes last quarter. It’s worth mentioning that Robert Pohly’s Samlyn Capital sold off the biggest position of all the hedgies watched by Insider Monkey, totaling close to $40.9 million in stock. Greg Poole’s fund, Echo Street Capital Management, also cut its stock, about $14.1 million worth. These bearish behaviors are interesting, as aggregate hedge fund interest dropped by 4 funds last quarter.
Let’s now review hedge fund activity in other stocks similar to Ares Management Corp (NYSE:ARES). We will take a look at Polaris Inc. (NYSE:PII), Stericycle Inc (NASDAQ:SRCL), Axon Enterprise, Inc. (NASDAQ:AAXN), Columbia Sportswear Company (NASDAQ:COLM), Cemex SAB de CV (NYSE:CX), FirstService Corporation (NASDAQ:FSV), and BJ’s Wholesale Club Holdings, Inc. (NYSE:BJ). All of these stocks’ market caps are similar to ARES’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 24.9 hedge funds with bullish positions and the average amount invested in these stocks was $381 million. That figure was $412 million in ARES’s case. Polaris Inc. (NYSE:PII) is the most popular stock in this table. On the other hand FirstService Corporation (NASDAQ:FSV) is the least popular one with only 12 bullish hedge fund positions. Ares Management Corp (NYSE:ARES) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for ARES is 32.4. 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 30.7% in 2020 through December 14th and still beat the market by 15.8 percentage points. A small number of hedge funds were also right about betting on ARES as the stock returned 20% since the end of the third quarter (through 12/14) and outperformed the market by an even larger margin.
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Disclosure: None. This article was originally published at Insider Monkey.