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The Insider Monkey team has completed processing the quarterly 13F filings for the September quarter submitted by the hedge funds and other money managers included in our extensive database. Most hedge fund investors experienced strong gains on the back of a strong market performance, which certainly propelled them to adjust their equity holdings so as to maintain the desired risk profile. As a result, the relevancy of these public filings and their content is indisputable, as they may reveal numerous high-potential stocks. The following article will discuss the smart money sentiment towards Arrow Financial Corporation (NASDAQ:AROW).
Arrow Financial Corporation (NASDAQ:AROW) was in 5 hedge funds' portfolios at the end of September. AROW investors should be aware of an increase in activity from the world's largest hedge funds recently. There were 3 hedge funds in our database with AROW holdings at the end of the previous quarter. Our calculations also showed that AROW isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings).
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 Russell 2000 ETFs by 40 percentage points since May 2014 (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.
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David Harding of Winton Capital Management[/caption]
We leave no stone unturned when looking for the next great investment idea. For example Discover is offering this insane cashback card, so we look into shorting the stock. One of the most bullish analysts in America just put his money where his mouth is. He says, "I'm investing more today than I did back in early 2009." So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We even check out this option genius' weekly trade ideas. This December, we recommended Adams Energy as a one-way bet based on an under-the-radar fund manager's investor letter and the stock already gained 20 percent. Keeping this in mind let's check out the fresh hedge fund action regarding Arrow Financial Corporation (NASDAQ:AROW).
How are hedge funds trading Arrow Financial Corporation (NASDAQ:AROW)?
Heading into the fourth quarter of 2019, a total of 5 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 67% from the second quarter of 2019. The graph below displays the number of hedge funds with bullish position in AROW over the last 17 quarters. So, let's review 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 Arrow Financial Corporation (NASDAQ:AROW), with a stake worth $12.6 million reported as of the end of September. Trailing Renaissance Technologies was Winton Capital Management, which amassed a stake valued at $0.9 million. Millennium Management, Citadel Investment Group, and Two Sigma Advisors 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 Renaissance Technologies allocated the biggest weight to Arrow Financial Corporation (NASDAQ:AROW), around 0.01% of its 13F portfolio. Winton Capital Management is also relatively very bullish on the stock, earmarking 0.01 percent of its 13F equity portfolio to AROW.
With a general bullishness amongst the heavyweights, key hedge funds have jumped into Arrow Financial Corporation (NASDAQ:AROW) headfirst. Winton Capital Management, managed by David Harding, established the biggest position in Arrow Financial Corporation (NASDAQ:AROW). Winton Capital Management had $0.9 million invested in the company at the end of the quarter. Ken Griffin's Citadel Investment Group also initiated a $0.4 million position during the quarter.
Let's check out hedge fund activity in other stocks similar to Arrow Financial Corporation (NASDAQ:AROW). We will take a look at Spartan Motors Inc (NASDAQ:SPAR), Financial Institutions, Inc. (NASDAQ:FISI), Marine Products Corporation (NYSE:MPX), and Hemisphere Media Group Inc (NASDAQ:HMTV). This group of stocks' market values are closest to AROW's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position SPAR,14,61216,3 FISI,10,38813,-1 MPX,5,15865,0 HMTV,7,36695,-1 Average,9,38147,0.25 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 9 hedge funds with bullish positions and the average amount invested in these stocks was $38 million. That figure was $15 million in AROW's case. Spartan Motors Inc (NASDAQ:SPAR) is the most popular stock in this table. On the other hand Marine Products Corporation (NYSE:MPX) is the least popular one with only 5 bullish hedge fund positions. Compared to these stocks Arrow Financial Corporation (NASDAQ:AROW) is even less popular than MPX. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. A small number of hedge funds were also right about betting on AROW, though not to the same extent, as the stock returned 7.4% during the fourth quarter (through 11/30) and outperformed the market as well.
Disclosure: None. This article was originally published at Insider Monkey.