Our extensive research has shown that imitating the smart money can generate significant returns for retail investors, which is why we track nearly 750 active prominent money managers and analyze their quarterly 13F filings. The stocks that are heavily bought by hedge funds historically outperformed the market, though there is no shortage of high profile failures like hedge funds' recent losses in Facebook. Let’s take a closer look at what the funds we track think about ArcBest Corp (NASDAQ:ARCB) in this article.
ArcBest Corp (NASDAQ:ARCB) shareholders have witnessed a decrease in enthusiasm from smart money of late. Our calculations also showed that arcb isn't among the 30 most popular stocks among hedge funds.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? 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 32 percentage points since May 2014 through March 12, 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. Even if you aren't comfortable with shorting stocks, you should at least avoid initiating long positions in our short portfolio.
Let's analyze the new hedge fund action encompassing ArcBest Corp (NASDAQ:ARCB).
What have hedge funds been doing with ArcBest Corp (NASDAQ:ARCB)?
Heading into the first quarter of 2019, a total of 10 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -29% from one quarter earlier. By comparison, 19 hedge funds held shares or bullish call options in ARCB a year ago. With hedgies' positions undergoing their usual ebb and flow, there exists an "upper tier" of key hedge fund managers who were adding to their stakes meaningfully (or already accumulated large positions).
More specifically, GLG Partners was the largest shareholder of ArcBest Corp (NASDAQ:ARCB), with a stake worth $13.4 million reported as of the end of December. Trailing GLG Partners was D E Shaw, which amassed a stake valued at $9.6 million. Gotham Asset Management, AQR Capital Management, and Two Sigma Advisors were also very fond of the stock, giving the stock large weights in their portfolios.
Judging by the fact that ArcBest Corp (NASDAQ:ARCB) has experienced declining sentiment from the smart money, logic holds that there was a specific group of hedge funds who sold off their positions entirely heading into Q3. Intriguingly, Alexander Mitchell's Scopus Asset Management cut the largest stake of all the hedgies watched by Insider Monkey, valued at close to $4.2 million in stock, and David Costen Haley's HBK Investments was right behind this move, as the fund cut about $0.4 million worth. These moves are important to note, as aggregate hedge fund interest fell by 4 funds heading into Q3.
Let's now review hedge fund activity in other stocks similar to ArcBest Corp (NASDAQ:ARCB). We will take a look at Teekay LNG Partners L.P. (NYSE:TGP), Cheetah Mobile Inc (NYSE:CMCM), Apollo Investment Corp. (NASDAQ:AINV), and Middlesex Water Company (NASDAQ:MSEX). This group of stocks' market values are closest to ARCB's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position TGP,8,19784,3 CMCM,4,5249,-3 AINV,15,29542,7 MSEX,11,48580,2 Average,9.5,25789,2.25 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 9.5 hedge funds with bullish positions and the average amount invested in these stocks was $26 million. That figure was $38 million in ARCB's case. Apollo Investment Corp. (NASDAQ:AINV) is the most popular stock in this table. On the other hand Cheetah Mobile Inc (NYSE:CMCM) is the least popular one with only 4 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. This is a slightly positive signal but we'd rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 15 most popular stocks) among hedge funds returned 24.2% through April 22nd and outperformed the S&P 500 ETF (SPY) by more than 7 percentage points. Unfortunately ARCB wasn't nearly as popular as these 15 stock and hedge funds that were betting on ARCB were disappointed as the stock returned -4.4% and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 15 most popular stocks) among hedge funds as 13 of these stocks already outperformed the market this year.
Disclosure: None. This article was originally published at Insider Monkey.