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As we already know from media reports and hedge fund investor letters, hedge funds delivered their best returns in a decade. Most investors who decided to stick with hedge funds after a rough 2018 recouped their losses by the end of the fourth quarter of 2019. A significant number of hedge funds continued their strong performance in 2020 and 2021 as well. We get to see hedge funds' thoughts towards the market and individual stocks by aggregating their quarterly portfolio movements and reading their investor letters. In this article, we will particularly take a look at what hedge funds think about Arconic Corporation (NYSE:ARNC).
Is Arconic Corporation (NYSE:ARNC) a healthy stock for your portfolio? The smart money was becoming hopeful. The number of bullish hedge fund bets improved by 2 recently. Arconic Corporation (NYSE:ARNC) was in 26 hedge funds' portfolios at the end of March. The all time high for this statistic is 46. Our calculations also showed that ARNC isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings). There were 24 hedge funds in our database with ARNC positions at the end of the fourth quarter.
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.
William Gray of Orbis Investment Management
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, economists warn of inflation flare up. So, we are checking out this backdoor gold play that has hit peak gains of 718% in a little over a year. 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. With all of this in mind let's take a glance at the key hedge fund action encompassing Arconic Corporation (NYSE:ARNC).
Do Hedge Funds Think ARNC Is A Good Stock To Buy Now?
At the end of the first quarter, a total of 26 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 8% from the fourth quarter of 2020. By comparison, 25 hedge funds held shares or bullish call options in ARNC a year ago. With hedgies' positions undergoing their usual ebb and flow, there exists a select group of key hedge fund managers who were increasing their stakes meaningfully (or already accumulated large positions).
Among these funds, Orbis Investment Management held the most valuable stake in Arconic Corporation (NYSE:ARNC), which was worth $322.1 million at the end of the fourth quarter. On the second spot was Elliott Investment Management which amassed $263.8 million worth of shares. Lion Point, Fisher Asset Management, and Arrowstreet Capital 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 Brightline Capital allocated the biggest weight to Arconic Corporation (NYSE:ARNC), around 8.91% of its 13F portfolio. Lion Point is also relatively very bullish on the stock, earmarking 6.09 percent of its 13F equity portfolio to ARNC.
As one would reasonably expect, key money managers have jumped into Arconic Corporation (NYSE:ARNC) headfirst. Fisher Asset Management, managed by Ken Fisher, assembled the most outsized position in Arconic Corporation (NYSE:ARNC). Fisher Asset Management had $15.5 million invested in the company at the end of the quarter. Quincy Lee's Ancient Art (Teton Capital) also made a $11.5 million investment in the stock during the quarter. The following funds were also among the new ARNC investors: Renaissance Technologies, Paul Tudor Jones's Tudor Investment Corp, and Alec Litowitz and Ross Laser's Magnetar Capital.
Let's now review hedge fund activity in other stocks similar to Arconic Corporation (NYSE:ARNC). We will take a look at Corcept Therapeutics Incorporated (NASDAQ:CORT), Fulgent Genetics, Inc. (NASDAQ:FLGT), Nelnet, Inc. (NYSE:NNI), American States Water Co (NYSE:AWR), Kontoor Brands, Inc. (NYSE:KTB), Macquarie Infrastructure Corporation (NYSE:MIC), and CarGurus, Inc. (NASDAQ:CARG). All of these stocks' market caps match ARNC's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position CORT,15,269878,-5 FLGT,18,98684,6 NNI,11,171625,-3 AWR,14,38906,-4 KTB,16,110576,0 MIC,33,663374,2 CARG,29,266502,-4 Average,19.4,231364,-1.1 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 19.4 hedge funds with bullish positions and the average amount invested in these stocks was $231 million. That figure was $718 million in ARNC's case. Macquarie Infrastructure Corporation (NYSE:MIC) is the most popular stock in this table. On the other hand Nelnet, Inc. (NYSE:NNI) is the least popular one with only 11 bullish hedge fund positions. Arconic Corporation (NYSE:ARNC) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for ARNC is 58. 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. 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 24% in 2021 through July 9th and still beat the market by 6.7 percentage points. Hedge funds were also right about betting on ARNC as the stock returned 41.6% since the end of Q1 (through 7/9) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
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Disclosure: None. This article was originally published at Insider Monkey.