In this article we will take a look at whether hedge funds think Howmet Aerospace Inc. (NYSE:HWM) is a good investment right now. We check hedge fund and billionaire investor sentiment before delving into hours of research. Hedge funds spend millions of dollars on Ivy League graduates, unconventional data sources, expert networks, and get tips from investment bankers and industry insiders. Sure they sometimes fail miserably, but their consensus stock picks historically outperformed the market after adjusting for known risk factors.
Is HWM a good stock to buy? Howmet Aerospace Inc. (NYSE:HWM) investors should be aware of an increase in enthusiasm from smart money of late. Howmet Aerospace Inc. (NYSE:HWM) was in 35 hedge funds' portfolios at the end of September. The all time high for this statistic is 46. Our calculations also showed that HWM isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video for a quick look at the top 5 stocks). Video: Watch our video about the top 5 most popular hedge fund stocks.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 66 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'll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 13% through November 17th. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Michael Lowenstein of Kensico Capital
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, the House passed a landmark bill decriminalizing marijuana. So, we are checking out this under the radar cannabis stock right now. We go through lists like the 15 best blue chip stocks to buy to pick the best large-cap stocks to buy. 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 website. With all of this in mind let's go over the latest hedge fund action encompassing Howmet Aerospace Inc. (NYSE:HWM).
Do Hedge Funds Think HWM Is A Good Stock To Buy Now?
At the end of September, a total of 35 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 17% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards HWM over the last 21 quarters. With hedgies' sentiment swirling, there exists a select group of key hedge fund managers who were upping their stakes significantly (or already accumulated large positions).
Among these funds, Elliott Investment Management held the most valuable stake in Howmet Aerospace Inc. (NYSE:HWM), which was worth $695 million at the end of the third quarter. On the second spot was Orbis Investment Management which amassed $531.1 million worth of shares. First Pacific Advisors LLC, Kensico Capital, and Lone Pine 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 Elliott Investment Management allocated the biggest weight to Howmet Aerospace Inc. (NYSE:HWM), around 7.29% of its 13F portfolio. Kensico Capital is also relatively very bullish on the stock, designating 4.26 percent of its 13F equity portfolio to HWM.
Now, key money managers have jumped into Howmet Aerospace Inc. (NYSE:HWM) headfirst. Baupost Group, managed by Seth Klarman, created the most valuable position in Howmet Aerospace Inc. (NYSE:HWM). Baupost Group had $77 million invested in the company at the end of the quarter. Brandon Haley's Holocene Advisors also made a $36.8 million investment in the stock during the quarter. The other funds with brand new HWM positions are Dmitry Balyasny's Balyasny Asset Management, Charles Davidson and Joseph Jacobs's Wexford Capital, and Noam Gottesman's GLG Partners.
Let's check out hedge fund activity in other stocks similar to Howmet Aerospace Inc. (NYSE:HWM). These stocks are Newell Brands Inc. (NASDAQ:NWL), Americold Realty Trust (NYSE:COLD), Molson Coors Beverage Company (NYSE:TAP), nCino, Inc. (NASDAQ:NCNO), Assurant, Inc. (NYSE:AIZ), MyoKardia, Inc. (NASDAQ:MYOK), and SYNNEX Corporation (NYSE:SNX). This group of stocks' market valuations are similar to HWM's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position NWL,27,1266887,-6 COLD,30,273605,1 TAP,33,316589,-3 NCNO,26,121408,26 AIZ,23,854291,-8 MYOK,29,1803197,-16 SNX,27,682996,3 Average,27.9,759853,-0.4 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 27.9 hedge funds with bullish positions and the average amount invested in these stocks was $760 million. That figure was $2448 million in HWM's case. Molson Coors Beverage Company (NYSE:TAP) is the most popular stock in this table. On the other hand Assurant, Inc. (NYSE:AIZ) is the least popular one with only 23 bullish hedge fund positions. Compared to these stocks Howmet Aerospace Inc. (NYSE:HWM) is more popular among hedge funds. Our overall hedge fund sentiment score for HWM is 82.8. 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 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks returned 33.3% in 2020 through December 18th but still managed to beat the market by 16.4 percentage points. Hedge funds were also right about betting on HWM as the stock returned 63.1% since the end of September (through 12/18) and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.
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Disclosure: None. This article was originally published at Insider Monkey.