"The end to the U.S. Government shutdown, reports of progress on China-U.S. trade talks, and the Federal Reserve’s confirmation that it did not plan further interest rate hikes in 2019 allayed investor fears and drove U.S. markets substantially higher in the first quarter of the year. Global markets followed suit pretty much across the board delivering what some market participants described as a “V-shaped” recovery," This is how Evermore Global Value summarized the first quarter in its investor letter. We pay attention to what hedge funds are doing in a particular stock before considering a potential investment because it works for us. So let’s take a glance at the smart money sentiment towards one of the stocks hedge funds invest in.
ArcBest Corp (NASDAQ:ARCB) investors should be aware of an increase in activity from the world's largest hedge funds lately. ARCB was in 12 hedge funds' portfolios at the end of the first quarter of 2019. There were 10 hedge funds in our database with ARCB positions at the end of the previous quarter. Our calculations also showed that ARCB isn't among the 30 most popular stocks among hedge funds.
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey's flagship best performing hedge funds strategy returned 25.8% year to date (through May 30th) and outperformed the market even though it draws its stock picks among small-cap stocks. This strategy also outperformed the market by 40 percentage points since its inception (see the details here). That's why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
[caption id="attachment_745225" align="aligncenter" width="473"] Noam Gottesman, GLG Partners[/caption]
We're going to analyze the latest hedge fund action regarding ArcBest Corp (NASDAQ:ARCB).
What have hedge funds been doing with ArcBest Corp (NASDAQ:ARCB)?
At the end of the first quarter, a total of 12 of the hedge funds tracked by Insider Monkey were long this stock, a change of 20% from the fourth quarter of 2018. By comparison, 19 hedge funds held shares or bullish call options in ARCB a year ago. With hedge funds' capital changing hands, there exists a few key hedge fund managers who were boosting their holdings substantially (or already accumulated large positions).
Among these funds, Royce & Associates held the most valuable stake in ArcBest Corp (NASDAQ:ARCB), which was worth $22.9 million at the end of the first quarter. On the second spot was D E Shaw which amassed $9.1 million worth of shares. Moreover, GLG Partners, Millennium Management, and Gotham Asset Management were also bullish on ArcBest Corp (NASDAQ:ARCB), allocating a large percentage of their portfolios to this stock.
As aggregate interest increased, key money managers have jumped into ArcBest Corp (NASDAQ:ARCB) headfirst. Citadel Investment Group, managed by Ken Griffin, assembled the biggest position in ArcBest Corp (NASDAQ:ARCB). Citadel Investment Group had $1.3 million invested in the company at the end of the quarter. Peter Rathjens, Bruce Clarke and John Campbell's Arrowstreet Capital also made a $0.6 million investment in the stock during the quarter. The following funds were also among the new ARCB investors: Mike Vranos's Ellington, Ken Griffin's Citadel Investment Group, and Gavin Saitowitz and Cisco J. del Valle's Springbok Capital.
Let's go over hedge fund activity in other stocks similar to ArcBest Corp (NASDAQ:ARCB). These stocks are Armada Hoffler Properties Inc (NYSE:AHH), Consolidated Communications Holdings Inc (NASDAQ:CNSL), Triumph Bancorp Inc (NASDAQ:TBK), and Valhi, Inc. (NYSE:VHI). All of these stocks' market caps are closest to ARCB's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position AHH,11,59825,2 CNSL,11,13357,-3 TBK,5,56315,-1 VHI,6,5844,-3 Average,8.25,33835,-1.25 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 8.25 hedge funds with bullish positions and the average amount invested in these stocks was $34 million. That figure was $60 million in ARCB's case. Armada Hoffler Properties Inc (NYSE:AHH) is the most popular stock in this table. On the other hand Triumph Bancorp Inc (NASDAQ:TBK) is the least popular one with only 5 bullish hedge fund positions. Compared to these stocks ArcBest Corp (NASDAQ:ARCB) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 6.2% in Q2 through June 19th and outperformed the S&P 500 ETF (SPY) by nearly 3 percentage points. Unfortunately ARCB wasn't nearly as popular as these 20 stocks and hedge funds that were betting on ARCB were disappointed as the stock returned -14.2% during the same period 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 13 of these stocks already outperformed the market in Q2.
Disclosure: None. This article was originally published at Insider Monkey.