Hedge Funds Were Selling Advanced Disposal Services, Inc. (ADSW) Before The Coronavirus

Abigail Fisher

Sat, Mar 28, 2020, 6:26 PM 6 min read

We hate to say this but, we told you so. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW and predicted a US recession when the S&P 500 Index was trading at the 3150 level. We also told you to short the market and buy long-term Treasury bonds. Our article also called for a total international travel ban. While we were warning you, President Trump minimized the threat and failed to act promptly. As a result of his inaction, we will now experience a deeper recession (see why hell is coming).

In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We at Insider Monkey have plowed through 835 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds' and investors' portfolio positions as of December 31st. In this article we look at what those investors think of Advanced Disposal Services, Inc. (NYSE:ADSW).

Advanced Disposal Services, Inc. (NYSE:ADSW) was in 22 hedge funds' portfolios at the end of December. ADSW investors should pay attention to a decrease in activity from the world's largest hedge funds lately. There were 24 hedge funds in our database with ADSW holdings at the end of the previous quarter. Our calculations also showed that ADSW isn't among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of this article for Q3 rankings).

According to most investors, hedge funds are perceived as underperforming, old investment tools of yesteryear. While there are more than 8000 funds with their doors open today, Our experts look at the crème de la crème of this club, around 850 funds. These money managers preside over the lion's share of the smart money's total capital, and by watching their matchless stock picks, Insider Monkey has uncovered many investment strategies that have historically outpaced Mr. Market. Insider Monkey's flagship short hedge fund strategy exceeded the S&P 500 short ETFs by around 20 percentage points per annum since its inception in March 2017. Our portfolio of short stocks lost 35.3% since February 2017 (through March 3rd) even though the market was up more than 35% during the same period. We just shared a list of 7 short targets in our latest quarterly update .

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Paul Marshall of Marshall Wace[/caption]

We leave no stone unturned when looking for the next great investment idea. For example we recently identified a stock that trades 25% below the net cash on its balance sheet. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences, and go through short-term trade recommendations like this one. We even check out the recommendations of services with hard to believe track records. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic's significance before most investors. Now let's review the recent hedge fund action regarding Advanced Disposal Services, Inc. (NYSE:ADSW).

Hedge fund activity in Advanced Disposal Services, Inc. (NYSE:ADSW)

Heading into the first quarter of 2020, a total of 22 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -8% from the previous quarter. The graph below displays the number of hedge funds with bullish position in ADSW over the last 18 quarters. With hedgies' capital changing hands, there exists a select group of noteworthy hedge fund managers who were adding to their stakes meaningfully (or already accumulated large positions).

According to Insider Monkey's hedge fund database, Alpine Associates, managed by Robert Emil Zoellner, holds the biggest position in Advanced Disposal Services, Inc. (NYSE:ADSW). Alpine Associates has a $154.9 million position in the stock, comprising 4.9% of its 13F portfolio. Coming in second is Magnetar Capital, led by Alec Litowitz and Ross Laser, holding a $106.3 million position; the fund has 2.2% of its 13F portfolio invested in the stock. Other peers that hold long positions include John Orrico's Water Island Capital, Clint Carlson's Carlson Capital and Renaissance Technologies. In terms of the portfolio weights assigned to each position Havens Advisors allocated the biggest weight to Advanced Disposal Services, Inc. (NYSE:ADSW), around 9.01% of its 13F portfolio. Water Island Capital is also relatively very bullish on the stock, earmarking 6.87 percent of its 13F equity portfolio to ADSW.

Seeing as Advanced Disposal Services, Inc. (NYSE:ADSW) has experienced bearish sentiment from the entirety of the hedge funds we track, it's easy to see that there were a few hedge funds who were dropping their positions entirely last quarter. At the top of the heap, Steve Pigott's Fort Baker Capital Management dumped the biggest investment of all the hedgies followed by Insider Monkey, worth close to $5.3 million in stock. Michael Hintze's fund, CQS Cayman LP, also dumped its stock, about $3.3 million worth. These transactions are interesting, as aggregate hedge fund interest dropped by 2 funds last quarter.

Let's now review hedge fund activity in other stocks similar to Advanced Disposal Services, Inc. (NYSE:ADSW). These stocks are Hilton Grand Vacations Inc. (NYSE:HGV), Cannae Holdings, Inc. (NYSE:CNNE), Element Solutions Inc (NYSE:ESI), and Columbia Banking System Inc (NASDAQ:COLB). This group of stocks' market valuations resemble ADSW's market valuation.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position HGV,46,1039360,3 CNNE,31,376691,12 ESI,37,736292,9 COLB,10,108526,1 Average,31,565217,6.25 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 31 hedge funds with bullish positions and the average amount invested in these stocks was $565 million. That figure was $656 million in ADSW's case. Hilton Grand Vacations Inc. (NYSE:HGV) is the most popular stock in this table. On the other hand Columbia Banking System Inc (NASDAQ:COLB) is the least popular one with only 10 bullish hedge fund positions. Advanced Disposal Services, Inc. (NYSE:ADSW) is not the least popular stock in this group but hedge fund interest is still below average. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks lost 17.4% in 2020 through March 25th but still beat the market by 5.5 percentage points. A small number of hedge funds were also right about betting on ADSW as the stock returned -1.7% during the same time period and outperformed the market by an even larger margin.