Hedge funds and large money managers usually invest with a focus on the long-term horizon and, therefore, short-lived dips or bumps on the charts, usually don't make them change their opinion towards a company. This time it may be different. During the fourth quarter of 2018 we observed increased volatility and small-cap stocks underperformed the market. Things completely reversed during the first quarter. Hedge fund investor letters indicated that they are cutting their overall exposure, closing out some position and doubling down on others. Let’s take a look at the hedge fund sentiment towards Ardagh Group S.A. (NYSE:ARD) to find out whether it was one of their high conviction long-term ideas.
Is Ardagh Group S.A. (NYSE:ARD) going to take off soon? Money managers are taking a bullish view. The number of long hedge fund bets increased by 2 recently. Our calculations also showed that ARD isn't among the 30 most popular stocks among hedge funds. ARD was in 12 hedge funds' portfolios at the end of the first quarter of 2019. There were 10 hedge funds in our database with ARD positions at the end of the previous quarter.
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' large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were 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'll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 30.9% through May 30, 2019. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
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Andy Redleaf of Whitebox Advisors[/caption]
Let's take a gander at the new hedge fund action regarding Ardagh Group S.A. (NYSE:ARD).
Hedge fund activity in Ardagh Group S.A. (NYSE:ARD)
At Q1's end, a total of 12 of the hedge funds tracked by Insider Monkey were long this stock, a change of 20% from the previous quarter. On the other hand, there were a total of 10 hedge funds with a bullish position in ARD a year ago. With the smart money's positions undergoing their usual ebb and flow, there exists an "upper tier" of key hedge fund managers who were upping their holdings significantly (or already accumulated large positions).