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 fourth 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 6 years and analyze what the smart money thinks of Aluminum Corp. of China Limited (NYSE:ACH) based on that data.
Is Aluminum Corp. of China Limited (NYSE:ACH) undervalued? Hedge funds were in a bearish mood. The number of long hedge fund bets fell by 1 lately. Aluminum Corp. of China Limited (NYSE:ACH) was in 3 hedge funds' portfolios at the end of the first quarter of 2021. The all time high for this statistic is 6. Our calculations also showed that ACH isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings).
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 S&P 500 ETFs by 115 percentage points since March 2017 (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.
Peter Rathjens of Arrowstreet Capital
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, an activist hedge fund wants to buy this $26 biotech stock for $50. So, we recommended a long position to our monthly premium newsletter subscribers. We go through lists like the 10 best battery 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. Now let's take a look at the key hedge fund action encompassing Aluminum Corp. of China Limited (NYSE:ACH).
Do Hedge Funds Think ACH Is A Good Stock To Buy Now?
At the end of the first quarter, a total of 3 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -25% from the previous quarter. By comparison, 2 hedge funds held shares or bullish call options in ACH 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.
More specifically, Renaissance Technologies was the largest shareholder of Aluminum Corp. of China Limited (NYSE:ACH), with a stake worth $5.5 million reported as of the end of March. Trailing Renaissance Technologies was Arrowstreet Capital, which amassed a stake valued at $1.6 million. Citadel Investment Group was 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 Renaissance Technologies allocated the biggest weight to Aluminum Corp. of China Limited (NYSE:ACH), around 0.01% of its 13F portfolio. Arrowstreet Capital is also relatively very bullish on the stock, dishing out 0.0022 percent of its 13F equity portfolio to ACH.
We view hedge fund activity in the stock unfavorable, but in this case there was only a single hedge fund selling its entire position: Marshall Wace LLP. One hedge fund selling its entire position doesn't always imply a bearish intent. Theoretically a hedge fund may decide to sell a promising position in order to invest the proceeds in a more promising idea. However, we don't think this is the case in this case because none of the 750+ hedge funds tracked by Insider Monkey identified ACH as a viable investment and initiated a position in the stock.
Let's now review hedge fund activity in other stocks - not necessarily in the same industry as Aluminum Corp. of China Limited (NYSE:ACH) but similarly valued. We will take a look at Stratasys, Ltd. (NASDAQ:SSYS), Kronos Bio, Inc. (NASDAQ:KRON), Acadia Realty Trust (NYSE:AKR), LTC Properties Inc (NYSE:LTC), Global Net Lease, Inc. (NYSE:GNL), Pulmonx Corporation (NASDAQ:LUNG), and Kite Realty Group Trust (NYSE:KRG). This group of stocks' market caps are closest to ACH's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position SSYS,24,481918,8 KRON,16,225983,-3 AKR,8,22188,-1 LTC,7,6702,-1 GNL,16,38694,9 LUNG,27,246881,5 KRG,11,46978,7 Average,15.6,152763,3.4 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 15.6 hedge funds with bullish positions and the average amount invested in these stocks was $153 million. That figure was $8 million in ACH's case. Pulmonx Corporation (NASDAQ:LUNG) is the most popular stock in this table. On the other hand LTC Properties Inc (NYSE:LTC) is the least popular one with only 7 bullish hedge fund positions. Compared to these stocks Aluminum Corp. of China Limited (NYSE:ACH) is even less popular than LTC. Our overall hedge fund sentiment score for ACH is 19. 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. Hedge funds clearly dropped the ball on ACH as the stock delivered strong returns, though hedge funds' consensus picks still generated respectable returns. 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 17.2% in 2021 through June 11th and still beat the market by 3.3 percentage points. A small number of hedge funds were also right about betting on ACH as the stock returned 37% since Q1 (through June 11th) and outperformed the market by an even larger margin.
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Disclosure: None. This article was originally published at Insider Monkey.
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