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Were Hedge Funds Right About A Schulman Inc (SHLM) As Shares Keep Falling After Poor Quarterly Results?

The shares of A Schulman Inc (NASDAQ:SHLM) have declined by 8.56% since its fiscal third quarter financial earnings release on July 6, 2015. The plastic compound maker announced a drop of 13% in its quarterly sales, with net sales of $560.9 million for the quarter. According to the company, foreign currency translation had an impact of $91 million on its earnings results for the quarter. Without taking restructuring costs and acquisition costs under consideration, the plastic company reported earnings per share of $0.72, which is lower than its same quarter earnings last year of $0.74. Wall Street expected earnings per share of $0.77 for A Schulman Inc (NASDAQ:SHLM) against revenue of $608.9 million. The firm has downgraded its earnings outlook for the year, with its present outlook dipping to a range between $2.37 to $2.42 per share against prior guidance of $2.50 to $2.55 per share. It is important to note that the plastic compound manufacturer was able to meet market expectations in its fiscal second quarter of 2015 when it posted EPS of $0.39. The high-performance plastic manufacturer announced completion of the acquisition of HGGC Citadel Plastics Holdings, Inc. (“Citadel”) on June 1, 2015 for $800 million. Citadel is a specialty engineered plastics company involved in the production of thermostat composites and industrial grade thermoplastic compounds.

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The shares of A Schulman Inc (NASDAQ:SHLM) have declined by 5.88% year-to-date now following the rough week and it appears the smart money predicted the headwinds for the company. Hedge funds tracked by Insider Monkey were bearish on the outlook of the company heading into the second quarter, with 11 hedge fund managers invested in Schulman, with aggregate investments of $135.43 million. Total ownership fell heavily from 17 hedge funds, though the value of their holdings increased from $119.38 million. The increase in net investments however was entirely due to the growth in the price of the shares of the company during the first quarter, as they gained over 19%; there was actually some selling of shares given that, as hedge funds clearly weren’t being sucked in by the big quarterly gains. Schulman has since given back all of those gains and more.

Why are we interested in the 13F filings of a select group of hedge funds? We use these filings to determine the top 15 small-cap stocks held by these elite funds based on 16 years of research that showed their top small-cap picks are much more profitable than both their large-cap stocks and the broader market as a whole. These small-cap stocks beat the S&P 500 Total Return Index by an average of nearly one percentage point per month in our backtests, which were conducted over the period of 1999 to 2012. Moreover, since the beginning of forward testing from August 2012, the strategy worked just as our research predicted, outperforming the market every year and returning 135% over the last 34 months, which is more than 80 percentage points higher than the returns of the S&P 500 ETF (SPY) (see more details).

In terms of insider activity, David Birney, Director at A Schulman Inc, sold 3,000 shares of the company on March 2. We track insider activity along with the activity of the smart money as it can give us great insight into the mood a company’s executive leadership has for its own shares.

Let’s check out the latest hedge fund action encompassing A. Schulman Inc (NASDAQ:SHLM) now.

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