We know that hedge funds generate strong, risk-adjusted returns over the long run, therefore imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, smart money investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn't mean that they don't have occasional colossal losses; they do (like Peltz's recent General Electric losses). However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, as the current round of 13F filings has just ended, let’s examine the smart money sentiment towards ArcBest Corp (NASDAQ:ARCB).
ArcBest Corp (NASDAQ:ARCB) has experienced an increase in activity from the world's largest hedge funds of late. ARCB was in 16 hedge funds' portfolios at the end of the second quarter of 2019. There were 12 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 (see the video below). Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
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' small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still 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 underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.
Unlike former hedge manager, Dr. Steve Sjuggerud, who is convinced Dow will soar past 40000, our long-short investment strategy doesn't rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. We're going to analyze the key hedge fund action encompassing ArcBest Corp (NASDAQ:ARCB).
How are hedge funds trading ArcBest Corp (NASDAQ:ARCB)?
At Q2's end, a total of 16 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 33% from one quarter earlier. By comparison, 16 hedge funds held shares or bullish call options in ARCB a year ago. So, let's check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Royce & Associates held the most valuable stake in ArcBest Corp (NASDAQ:ARCB), which was worth $18.4 million at the end of the second quarter. On the second spot was D E Shaw which amassed $11.1 million worth of shares. Moreover, GLG Partners, GMT Capital, and Gotham Asset Management were also bullish on ArcBest Corp (NASDAQ:ARCB), allocating a large percentage of their portfolios to this stock.
As industrywide interest jumped, some big names were breaking ground themselves. GMT Capital, managed by Thomas E. Claugus, created the largest position in ArcBest Corp (NASDAQ:ARCB). GMT Capital had $4.7 million invested in the company at the end of the quarter. Alexander Mitchell's Scopus Asset Management also made a $2.8 million investment in the stock during the quarter. The other funds with new positions in the stock are Renaissance Technologies, Benjamin A. Smith's Laurion Capital Management, and Dmitry Balyasny's Balyasny Asset Management.
Let's also examine hedge fund activity in other stocks - not necessarily in the same industry as ArcBest Corp (NASDAQ:ARCB) but similarly valued. We will take a look at Personalis, Inc. (NASDAQ:PSNL), Cass Information Systems, Inc. (NASDAQ:CASS), Ruth's Hospitality Group, Inc. (NASDAQ:RUTH), and Extraction Oil & Gas, Inc. (NASDAQ:XOG). This group of stocks' market valuations are closest to ARCB's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position PSNL,17,83879,17 CASS,11,20185,0 RUTH,16,54849,1 XOG,17,91772,-3 Average,15.25,62671,3.75 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 15.25 hedge funds with bullish positions and the average amount invested in these stocks was $63 million. That figure was $63 million in ARCB's case. Personalis, Inc. (NASDAQ:PSNL) is the most popular stock in this table. On the other hand Cass Information Systems, Inc. (NASDAQ:CASS) is the least popular one with only 11 bullish hedge fund positions. ArcBest Corp (NASDAQ:ARCB) is not the most popular stock in this group but hedge fund interest is still above average. Our calculations showed that top 20 most popular stocks among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Hedge funds were also right about betting on ARCB as the stock returned 8.6% during the third quarter and outperformed the market. Hedge funds were rewarded for their relative bullishness.
Disclosure: None. This article was originally published at Insider Monkey.