Were Hedge Funds Right About Warming Up To Asbury Automotive Group, Inc. (ABG)?

We are still in an overall bull market and many stocks that smart money investors were piling into surged through October 17th. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained 45% and 39% respectively. Hedge funds’ top 3 stock picks returned 34.4% this year and beat the S&P 500 ETFs by 13 percentage points. Investing in index funds guarantees you average returns, not superior returns. We are looking to generate superior returns for our readers. 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 Asbury Automotive Group, Inc. (NYSE:ABG).

Is Asbury Automotive Group, Inc. (NYSE:ABG) a buy, sell, or hold? Hedge funds are taking a bullish view. The number of long hedge fund positions inched up by 2 lately. Our calculations also showed that ABG isn’t among the 30 most popular stocks among hedge funds (see the video below). ABG was in 17 hedge funds’ portfolios at the end of June. There were 15 hedge funds in our database with ABG holdings at the end of the previous quarter.
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

To most traders, hedge funds are viewed as slow, outdated investment vehicles of the past. While there are over 8000 funds in operation at present, Our researchers choose to focus on the upper echelon of this group, around 750 funds. These investment experts direct the majority of the smart money’s total asset base, and by tailing their finest stock picks, Insider Monkey has spotted a number of investment strategies that have historically outperformed the S&P 500 index. Insider Monkey’s flagship hedge fund strategy outpaced the S&P 500 index by around 5 percentage points per annum since its inception in May 2014. We were able to generate large returns even by identifying short candidates. Our portfolio of short stocks lost 25.7% since February 2017 (through September 30th) even though the market was up more than 33% during the same period. We just shared a list of 10 short targets in our latest quarterly update .

David Abrams

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. Let’s take a look at the latest hedge fund action encompassing Asbury Automotive Group, Inc. (NYSE:ABG).

What have hedge funds been doing with Asbury Automotive Group, Inc. (NYSE:ABG)?

At the end of the second quarter, a total of 17 of the hedge funds tracked by Insider Monkey were long this stock, a change of 13% from the first quarter of 2019. Below, you can check out the change in hedge fund sentiment towards ABG over the last 16 quarters. With the smart money’s capital changing hands, there exists a select group of noteworthy hedge fund managers who were increasing their stakes significantly (or already accumulated large positions).

No of Hedge Funds with ABG Positions

The largest stake in Asbury Automotive Group, Inc. (NYSE:ABG) was held by Abrams Capital Management, which reported holding $160.5 million worth of stock at the end of March. It was followed by Eminence Capital with a $26.5 million position. Other investors bullish on the company included GLG Partners, Arrowstreet Capital, and Royce & Associates.

Consequently, key money managers have jumped into Asbury Automotive Group, Inc. (NYSE:ABG) headfirst. Royce & Associates, managed by Chuck Royce, assembled the biggest position in Asbury Automotive Group, Inc. (NYSE:ABG). Royce & Associates had $4.2 million invested in the company at the end of the quarter. D. E. Shaw’s D E Shaw also initiated a $1.3 million position during the quarter. The following funds were also among the new ABG investors: Paul Marshall and Ian Wace’s Marshall Wace LLP and Steve Cohen’s Point72 Asset Management.

Let’s now review hedge fund activity in other stocks similar to Asbury Automotive Group, Inc. (NYSE:ABG). These stocks are Redfin Corporation (NASDAQ:RDFN), Osisko Gold Royalties Ltd (NYSE:OR), Matson, Inc. (NYSE:MATX), and Callaway Golf Company (NYSE:ELY). All of these stocks’ market caps are closest to ABG’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
RDFN 10 179010 2
OR 12 41963 5
MATX 8 5690 -1
ELY 20 215556 -6
Average 12.5 110555 0

View table here if you experience formatting issues.

As you can see these stocks had an average of 12.5 hedge funds with bullish positions and the average amount invested in these stocks was $111 million. That figure was $225 million in ABG’s case. Callaway Golf Company (NYSE:ELY) is the most popular stock in this table. On the other hand Matson, Inc. (NYSE:MATX) is the least popular one with only 8 bullish hedge fund positions. Asbury Automotive Group, Inc. (NYSE:ABG) is not the most popular stock in this group but hedge fund interest is still above average. Our calculations showed that top 20 most popular stocks among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Hedge funds were also right about betting on ABG as the stock returned 21.3% during the third quarter and outperformed the market. Hedge funds were rewarded for their relative bullishness.

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