Is ASTE A Good Stock To Buy Now?

Although the masses and most of the financial media blame hedge funds for their exorbitant fee structure and disappointing performance, these investors have proved to have great stock picking abilities over the years (that’s why their assets under management continue to swell). We believe hedge fund sentiment should serve as a crucial tool of an individual investor’s stock selection process, as it may offer great insights of how the brightest minds of the finance industry feel about specific stocks. After all, these people have access to smartest analysts and expensive data/information sources that individual investors can’t match. So should one consider investing in Astec Industries, Inc. (NASDAQ:ASTE)? The smart money sentiment can provide an answer to this question.

Is ASTE a good stock to buy now? Money managers were taking an optimistic view. The number of long hedge fund bets advanced by 5 lately. Astec Industries, Inc. (NASDAQ:ASTE) was in 15 hedge funds’ portfolios at the end of September. The all time high for this statistic is 19. Our calculations also showed that ASTE 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 10 hedge funds in our database with ASTE holdings at the end of June.

Video: Watch our video about the top 5 most popular hedge fund stocks.

So, why do we pay attention to hedge fund sentiment before making any investment decisions? 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 more than 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. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.

Roger Ibbotson of Zebra Capital Management

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. Keeping this in mind let’s take a gander at the key hedge fund action encompassing Astec Industries, Inc. (NASDAQ:ASTE).

Do Hedge Funds Think ASTE Is A Good Stock To Buy Now?

At the end of September, a total of 15 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 50% from the second quarter of 2020. The graph below displays the number of hedge funds with bullish position in ASTE over the last 21 quarters. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Is ASTE A Good Stock To Buy?

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, GAMCO Investors, managed by Mario Gabelli, holds the biggest position in Astec Industries, Inc. (NASDAQ:ASTE). GAMCO Investors has a $60.2 million position in the stock, comprising 0.7% of its 13F portfolio. On GAMCO Investors’s heels is Adage Capital Management, managed by Phill Gross and Robert Atchinson, which holds a $12.9 million position; less than 0.1%% of its 13F portfolio is allocated to the stock. Remaining members of the smart money that are bullish contain Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital, Chuck Royce’s Royce & Associates and Jeffrey Moskowitz’s Harvey Partners. In terms of the portfolio weights assigned to each position Harvey Partners allocated the biggest weight to Astec Industries, Inc. (NASDAQ:ASTE), around 4.37% of its 13F portfolio. GAMCO Investors is also relatively very bullish on the stock, setting aside 0.67 percent of its 13F equity portfolio to ASTE.

With a general bullishness amongst the heavyweights, specific money managers have jumped into Astec Industries, Inc. (NASDAQ:ASTE) headfirst. Renaissance Technologies, established the most valuable position in Astec Industries, Inc. (NASDAQ:ASTE). Renaissance Technologies had $1.1 million invested in the company at the end of the quarter. Paul Marshall and Ian Wace’s Marshall Wace LLP also made a $0.8 million investment in the stock during the quarter. The other funds with brand new ASTE positions are Israel Englander’s Millennium Management, Cliff Asness’s AQR Capital Management, and Roger Ibbotson’s Zebra Capital Management.

Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Astec Industries, Inc. (NASDAQ:ASTE) but similarly valued. These stocks are Zuora, Inc. (NYSE:ZUO), Phreesia, Inc. (NYSE:PHR), Model N Inc (NYSE:MODN), TTM Technologies, Inc. (NASDAQ:TTMI), Luminex Corporation (NASDAQ:LMNX), COMPASS Pathways Plc (NASDAQ:CMPS), and MFA Financial, Inc. (NYSE:MFA). This group of stocks’ market values resemble ASTE’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
ZUO 23 130724 2
PHR 22 126830 2
MODN 22 144636 4
TTMI 20 124165 2
LMNX 29 234236 2
CMPS 17 139456 17
MFA 18 38012 2
Average 21.6 134008 4.4

View table here if you experience formatting issues.

As you can see these stocks had an average of 21.6 hedge funds with bullish positions and the average amount invested in these stocks was $134 million. That figure was $99 million in ASTE’s case. Luminex Corporation (NASDAQ:LMNX) is the most popular stock in this table. On the other hand COMPASS Pathways Plc (NASDAQ:CMPS) is the least popular one with only 17 bullish hedge fund positions. Compared to these stocks Astec Industries, Inc. (NASDAQ:ASTE) is even less popular than CMPS. Our overall hedge fund sentiment score for ASTE is 33.7. 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 but managed to beat the market by 15.8 percentage points. A small number of hedge funds were also right about betting on ASTE, though not to the same extent, as the stock returned 9% since the end of September (through December 14th) and outperformed the market as well.

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Disclosure: None. This article was originally published at Insider Monkey.