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Is Ares Dynamic Credit Allocation Fund Inc (ARDC) Going to Burn These Hedge Funds?

As industrywide interest jumped, some big names have been driving this bullishness. Laurion Capital Management, managed by Benjamin A. Smith, initiated the largest position in Ares Dynamic Credit Allocation Fund Inc (NYSE:ARDC), worth roughly $0.5 million at the end of the quarter. The position initiated by Charles Clough’s Clough Capital Partners carried a value of $0.4 million at the end of September.

Let’s check out hedge fund activity in other stocks similar to Ares Dynamic Credit Allocation Fund Inc (NYSE:ARDC). These stocks are McEwen Mining Inc (NYSE:MUX), United Community Financial Corp (NASDAQ:UCFC), Tuesday Morning Corporation (NASDAQ:TUES), and Synta Pharmaceuticals Corp. (NASDAQ:SNTA). This group of stocks’ market values are similar to ARDC’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
MUX 7 7806 -3
UCFC 11 22815 0
TUES 13 42329 -3
SNTA 7 4594 -1

As you can see these stocks had an average of 10 hedge funds with bullish positions and the average amount invested in these stocks was $19 million. That figure was just $10 million in ARDC’s case. Tuesday Morning Corporation (NASDAQ:TUES) is the most popular stock in this table, while McEwen Mining Inc (NYSE:MUX) and Synta Pharmaceuticals Corp. (NASDAQ:SNTA) are at the other end of the specter with only 7 bullish hedge fund positions each. Compared to these stocks Ares Dynamic Credit Allocation Fund Inc (NYSE:ARDC) is even less popular than MUX. Considering that hedge funds aren’t fond of this stock in relation to other companies analyzed in this article, it may be a good idea to analyze it in detail and understand why the smart money isn’t behind this stock. This isn’t necessarily bad news. Although it is possible that hedge funds may think the stock is overpriced and view the stock as a short candidate, they may not be very familiar with the bullish thesis. In either case more research is warranted.

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