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Insider Monkey has processed numerous 13F filings of hedge funds and successful value investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds' and successful investors' positions as of the end of the first quarter. You can find articles about an individual hedge fund's trades on numerous financial news websites. However, in this article we will take a look at their collective moves over the last 4.5 years and analyze what the smart money thinks of Arcosa, Inc. (NYSE:ACA) based on that data.
Is Arcosa, Inc. (NYSE:ACA) undervalued? The best stock pickers are reducing their bets on the stock. The number of long hedge fund bets were cut by 3 lately. Our calculations also showed that ACA isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks).
Video: Watch our video about the top 5 most popular hedge fund stocks.
If you'd ask most investors, hedge funds are viewed as underperforming, old financial tools of years past. While there are greater than 8000 funds with their doors open today, We choose to focus on the aristocrats of this club, about 850 funds. These money managers command bulk of the hedge fund industry's total asset base, and by watching their inimitable investments, Insider Monkey has revealed several investment strategies that have historically beaten the broader indices. Insider Monkey's flagship short hedge fund strategy outpaced the S&P 500 short ETFs by around 20 percentage points a year since its inception in March 2017. Our portfolio of short stocks lost 36% since February 2017 (through May 18th) even though the market was up 30% during the same period. We just shared a list of 8 short targets in our latest quarterly update .
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Fred DiSanto of Ancora Advisors[/caption]
We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world’s largest cannabis market, so we check out this European marijuana stock pitch. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind we're going to review the key hedge fund action encompassing Arcosa, Inc. (NYSE:ACA).
What have hedge funds been doing with Arcosa, Inc. (NYSE:ACA)?
At the end of the first quarter, a total of 17 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -15% from one quarter earlier. On the other hand, there were a total of 25 hedge funds with a bullish position in ACA a year ago. So, let's see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Parsifal Capital Management held the most valuable stake in Arcosa, Inc. (NYSE:ACA), which was worth $42.4 million at the end of the third quarter. On the second spot was Royce & Associates which amassed $41.5 million worth of shares. Yacktman Asset Management, Ancora Advisors, and D E Shaw 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 Parsifal Capital Management allocated the biggest weight to Arcosa, Inc. (NYSE:ACA), around 15.53% of its 13F portfolio. Harvey Partners is also relatively very bullish on the stock, dishing out 6.63 percent of its 13F equity portfolio to ACA.
Due to the fact that Arcosa, Inc. (NYSE:ACA) has experienced a decline in interest from hedge fund managers, logic holds that there exists a select few fund managers that elected to cut their full holdings in the first quarter. At the top of the heap, Ken Griffin's Citadel Investment Group dropped the largest position of the 750 funds followed by Insider Monkey, valued at about $18.6 million in stock, and Steve Cohen's Point72 Asset Management was right behind this move, as the fund sold off about $8.6 million worth. These transactions are interesting, as aggregate hedge fund interest dropped by 3 funds in the first quarter.
Let's also examine hedge fund activity in other stocks - not necessarily in the same industry as Arcosa, Inc. (NYSE:ACA) but similarly valued. We will take a look at Copa Holdings, S.A. (NYSE:CPA), RH (NYSE:RH), Liberty Latin America Ltd. (NASDAQ:LILA), and Lithia Motors Inc (NYSE:LAD). This group of stocks' market values are similar to ACA's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position CPA,15,138965,-7 RH,30,549200,-8 LILA,12,98864,1 LAD,27,388450,-2 Average,21,293870,-4 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 21 hedge funds with bullish positions and the average amount invested in these stocks was $294 million. That figure was $184 million in ACA's case. RH (NYSE:RH) is the most popular stock in this table. On the other hand Liberty Latin America Ltd. (NASDAQ:LILA) is the least popular one with only 12 bullish hedge fund positions. Arcosa, Inc. (NYSE:ACA) is not the least popular stock in this group but hedge fund interest is still below average. 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 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 13.4% in 2020 through June 22nd and surpassed the market by 15.9 percentage points. Unfortunately ACA wasn't nearly as popular as these 10 stocks (hedge fund sentiment was quite bearish); ACA investors were disappointed as the stock returned 4.4% during the second quarter and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.
Disclosure: None. This article was originally published at Insider Monkey.