Is ARC Document Solutions Inc (ARC) Going to Burn These Hedge Funds?

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We view hedge fund activity in the stock unfavorable, but in this case there was only a single hedge fund selling its entire position: Polaris Capital Management. 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 700+ hedge funds tracked by Insider Monkey identified ARC as a viable investment and initiated a position in the stock.

Let’s also examine hedge fund activity in other stocks similar to ARC Document Solutions Inc (NYSE:ARC). We will take a look at Travelzoo Inc. (NASDAQ:TZOO), Allot Communications Ltd. (NASDAQ:ALLT), Northrim BanCorp, Inc. (NASDAQ:NRIM), and Owens Realty Mortgage Inc (NYSEMKT:ORM). This group of stocks’ market valuations match ARC’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
TZOO 9 18512 3
ALLT 7 23432 -1
NRIM 6 22505 -1
ORM 4 16238 0

As you can see these stocks had an average of 7 hedge funds with bullish positions and the average amount invested in these stocks was $20 million. That figure was $31 million in ARC’s case. Travelzoo Inc. (NASDAQ:TZOO) is the most popular stock in this table. On the other hand Owens Realty Mortgage Inc (NYSEMKT:ORM) is the least popular one with only 4 bullish hedge fund positions. Compared to these stocks ARC Document Solutions Inc (NYSE:ARC) is more popular among hedge funds. Considering that hedge funds are fond of this stock in relation to its market cap peers, it may be a good idea to analyze it in detail and potentially include it in your portfolio.

Disclosure: None

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