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Should You Buy Ares Management L.P. (ARES)?

Insider Monkey has processed numerous 13F filings of hedge funds and famous investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds and investors’ positions as of the end of the third quarter. You can find write-ups about an individual hedge fund’s trades on numerous financial news websites. However, in this article we will take a look at their collective moves and analyze what the smart money thinks of Ares Management L.P. (NYSE:ARES) based on that data.

Ares Management L.P. (NYSE:ARES) has seen an increase in hedge fund interest of late. Our calculations also showed that ARES isn’t among the 30 most popular stocks among hedge funds.

In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s flagship best performing hedge funds strategy returned 6.3% year to date (through December 3rd) and outperformed the market even though it draws its stock picks among small-cap stocks. This strategy also outperformed the market by 18 percentage points since its inception (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

Izzy Englander of MILLENNIUM MANAGEMENT

Let’s take a glance at the latest hedge fund action surrounding Ares Management L.P. (NYSE:ARES).

Hedge fund activity in Ares Management L.P. (NYSE:ARES)

At the end of the third quarter, a total of 15 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 88% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in ARES over the last 13 quarters. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

ARES_dec2018

Of the funds tracked by Insider Monkey, Royce & Associates, managed by Chuck Royce, holds the biggest position in Ares Management L.P. (NYSE:ARES). Royce & Associates has a $119.9 million position in the stock, comprising 0.8% of its 13F portfolio. On Royce & Associates’s heels is Millennium Management, managed by Israel Englander, which holds a $53.9 million position; the fund has 0.1% of its 13F portfolio invested in the stock. Remaining professional money managers with similar optimism consist of Ken Griffin’s Citadel Investment Group, Benjamin A. Smith’s Laurion Capital Management and Anton Schutz’s Mendon Capital Advisors.

As industrywide interest jumped, key hedge funds have jumped into Ares Management L.P. (NYSE:ARES) headfirst. Citadel Investment Group, managed by Ken Griffin, initiated the largest position in Ares Management L.P. (NYSE:ARES). Citadel Investment Group had $33.5 million invested in the company at the end of the quarter. Benjamin A. Smith’s Laurion Capital Management also initiated a $24.9 million position during the quarter. The other funds with new positions in the stock are Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital, Joe DiMenna’s ZWEIG DIMENNA PARTNERS, and Glenn Russell Dubin’s Highbridge Capital Management.

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Ares Management Corporation (NYSE:ARES) but similarly valued. We will take a look at First Solar, Inc. (NASDAQ:FSLR), Royal Gold, Inc (NASDAQ:RGLD), Cable One Inc (NYSE:CABO), and Empire State Realty Trust Inc (NYSE:ESRT). All of these stocks’ market caps resemble ARES’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
FSLR 14 294075 -9
RGLD 17 78819 -2
CABO 18 628986 0
ESRT 13 223977 -4
Average 15.5 306464 -3.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 15.5 hedge funds with bullish positions and the average amount invested in these stocks was $306 million. That figure was $305 million in ARES’s case. Cable One Inc (NYSE:CABO) is the most popular stock in this table. On the other hand Empire State Realty Trust Inc (NYSE:ESRT) is the least popular one with only 13 bullish hedge fund positions. Ares Management L.P. (NYSE:ARES) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. In this regard CABO might be a better candidate to consider a long position.

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

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