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Were Hedge Funds Right About Ditching Grupo Aeroportuario del Sureste (ASR)?

It seems that the masses and most of the financial media hate hedge funds and what they do, but why is this hatred of hedge funds so prominent? At the end of the day, these asset management firms do not gamble the hard-earned money of the people who are on the edge of poverty. Truth be told, most hedge fund managers and other smaller players within this industry are very smart and skilled investors. Of course, they may also make wrong bets in some instances, but no one knows what the future holds and how market participants will react to the bountiful news that floods in each day. The Standard and Poor’s 500 Index returned approximately 20% in the first 9 months of this year (through September 30th). Conversely, hedge funds’ top 20 large-cap stock picks generated a return of 24% during the same 9-month period, with the majority of these stock picks outperforming the broader market benchmark. Coincidence? It might happen to be so, but it is unlikely. Our research covering the last 18 years indicates that hedge funds’ consensus stock picks generate superior risk-adjusted returns. That’s why we believe it isn’t a waste of time to check out hedge fund sentiment before you invest in a stock like Grupo Aeroportuario del Sureste (NYSE:ASR).

Grupo Aeroportuario del Sureste (NYSE:ASR) shareholders have witnessed a decrease in hedge fund sentiment of late. Our calculations also showed that ASR isn’t among the 30 most popular stocks among hedge funds (see the video below).
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. 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 market by 40 percentage points since May 2014 through May 30, 2019 (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.

Paul Marshall Marshall Wace

Unlike former hedge manager, Dr. Steve Sjuggerud, who is convinced Dow will soar past 40000, our long-short investment strategy doesn’t rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. We’re going to analyze the recent hedge fund action encompassing Grupo Aeroportuario del Sureste (NYSE:ASR).

What have hedge funds been doing with Grupo Aeroportuario del Sureste (NYSE:ASR)?

At the end of the second quarter, a total of 7 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -13% from the first quarter of 2019. The graph below displays the number of hedge funds with bullish position in ASR over the last 16 quarters. With hedge funds’ sentiment swirling, there exists a select group of noteworthy hedge fund managers who were upping their holdings significantly (or already accumulated large positions).

ASR_oct2019

When looking at the institutional investors followed by Insider Monkey, Renaissance Technologies has the largest position in Grupo Aeroportuario del Sureste (NYSE:ASR), worth close to $15.5 million, corresponding to less than 0.1%% of its total 13F portfolio. Coming in second is Millennium Management, led by Israel Englander, holding a $13 million position; less than 0.1%% of its 13F portfolio is allocated to the stock. Some other professional money managers that hold long positions include Cliff Asness’s AQR Capital Management, Michael Moriarty’s Teewinot Capital Advisers and Paul Marshall and Ian Wace’s Marshall Wace LLP.

Seeing as Grupo Aeroportuario del Sureste (NYSE:ASR) has witnessed bearish sentiment from hedge fund managers, logic holds that there was a specific group of hedge funds who were dropping their entire stakes in the second quarter. At the top of the heap, Ken Griffin’s Citadel Investment Group cut the largest position of all the hedgies watched by Insider Monkey, totaling an estimated $0.4 million in stock. Matthew Tewksbury’s fund, Stevens Capital Management, also cut its stock, about $0.4 million worth. These moves are intriguing to say the least, as aggregate hedge fund interest was cut by 1 funds in the second quarter.

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Grupo Aeroportuario del Sureste (NYSE:ASR) but similarly valued. We will take a look at Equitrans Midstream Corporation (NYSE:ETRN), Nexstar Media Group, Inc. (NASDAQ:NXST), Jabil Inc. (NYSE:JBL), and Southwest Gas Holdings, Inc. (NYSE:SWX). This group of stocks’ market caps are closest to ASR’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
ETRN 16 551346 -3
NXST 40 1117748 9
JBL 26 315043 6
SWX 16 246360 -4
Average 24.5 557624 2

View table here if you experience formatting issues.

As you can see these stocks had an average of 24.5 hedge funds with bullish positions and the average amount invested in these stocks was $558 million. That figure was $45 million in ASR’s case. Nexstar Media Group, Inc. (NASDAQ:NXST) is the most popular stock in this table. On the other hand Equitrans Midstream Corporation (NYSE:ETRN) is the least popular one with only 16 bullish hedge fund positions. Compared to these stocks Grupo Aeroportuario del Sureste (NYSE:ASR) is even less popular than ETRN. Hedge funds dodged a bullet by taking a bearish stance towards ASR. Our calculations showed that the top 20 most popular hedge fund stocks returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Unfortunately ASR wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); ASR investors were disappointed as the stock returned -5.9% during the third quarter and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as many of these stocks already outperformed the market so far in 2019.

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

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