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ArcelorMittal (MT): Are Hedge Funds Right About This Stock?

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In this article we will take a look at whether hedge funds think ArcelorMittal (NYSE:MT) is a good investment right now. We check hedge fund and billionaire investor sentiment before delving into hours of research. Hedge funds spend millions of dollars on Ivy League graduates, unconventional data sources, expert networks, and get tips from investment bankers and industry insiders. Sure they sometimes fail miserably, but their consensus stock picks historically outperformed the market after adjusting for known risk factors.

ArcelorMittal (NYSE:MT) investors should pay attention to an increase in activity from the world's largest hedge funds recently. ArcelorMittal (NYSE:MT) was in 22 hedge funds' portfolios at the end of June. The all time high for this statistic is 25. Our calculations also showed that MT isn't among the 30 most popular stocks among hedge funds (click for Q2 rankings).

Today there are a multitude of gauges stock market investors employ to appraise stocks. A pair of the best gauges are hedge fund and insider trading signals. Our researchers have shown that, historically, those who follow the top picks of the elite money managers can outpace the broader indices by a superb amount (see the details here). Also, our monthly newsletter's portfolio of long stock picks returned 185.4% since March 2017 (through August 2021) and beat the S&P 500 Index by more than 79 percentage points. You can download a sample issue of this newsletter on our website.

Jeffrey Gendell of Tontine Asset Management

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. We go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our homepage. With all of this in mind we're going to take a gander at the fresh hedge fund action encompassing ArcelorMittal (NYSE:MT).

Do Hedge Funds Think MT Is A Good Stock To Buy Now?

At Q2's end, a total of 22 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 5% from one quarter earlier. By comparison, 19 hedge funds held shares or bullish call options in MT a year ago. So, let's find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

More specifically, GQG Partners was the largest shareholder of ArcelorMittal (NYSE:MT), with a stake worth $737.8 million reported as of the end of June. Trailing GQG Partners was Citadel Investment Group, which amassed a stake valued at $63.2 million. Scopus Asset Management, Castle Hook Partners, and Citadel Investment Group were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Elm Ridge Capital allocated the biggest weight to ArcelorMittal (NYSE:MT), around 3.57% of its 13F portfolio. Castle Hook Partners is also relatively very bullish on the stock, earmarking 3.3 percent of its 13F equity portfolio to MT.

With a general bullishness amongst the heavyweights, some big names were leading the bulls' herd. Adage Capital Management, managed by Phill Gross and Robert Atchinson, created the biggest position in ArcelorMittal (NYSE:MT). Adage Capital Management had $23.3 million invested in the company at the end of the quarter. Jeffrey Gendell's Tontine Asset Management also made a $8.9 million investment in the stock during the quarter. The other funds with brand new MT positions are D. E. Shaw's D E Shaw, Matthew Hulsizer's PEAK6 Capital Management, and Louis Navellier's Navellier & Associates.

Let's go over hedge fund activity in other stocks - not necessarily in the same industry as ArcelorMittal (NYSE:MT) but similarly valued. We will take a look at V.F. Corporation (NYSE:VFC), AutoZone, Inc. (NYSE:AZO), Datadog, Inc. (NASDAQ:DDOG), NatWest Group plc (NYSE:NWG), Valero Energy Corporation (NYSE:VLO), Liberty Broadband Corp (NASDAQ:LBRDA), and BeiGene, Ltd. (NASDAQ:BGNE). This group of stocks' market values match MT's market value.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position VFC,32,1005658,1 AZO,34,545700,0 DDOG,56,3235244,12 NWG,5,6649,-1 VLO,38,259399,-3 LBRDA,28,904867,5 BGNE,21,6192135,2 Average,30.6,1735665,2.3 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 30.6 hedge funds with bullish positions and the average amount invested in these stocks was $1736 million. That figure was $1045 million in MT's case. Datadog, Inc. (NASDAQ:DDOG) is the most popular stock in this table. On the other hand NatWest Group plc (NYSE:NWG) is the least popular one with only 5 bullish hedge fund positions. ArcelorMittal (NYSE:MT) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for MT is 49.1. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. This is a slightly negative signal and we'd rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 24% in 2021 through October 22nd and surpassed the market again by 1.6 percentage points. Unfortunately MT wasn't nearly as popular as these 5 stocks (hedge fund sentiment was quite bearish); MT investors were disappointed as the stock returned 2.8% since the end of June (through 10/22) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2021.

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