Looking for high-potential stocks? Just follow the big players within the hedge fund industry. Why should you do so? Let’s take a brief look at what statistics have to say about hedge funds’ stock picking abilities to illustrate. The Standard and Poor’s 500 Index returned approximately 5.2% in the 12 months ending October 30, with more than 51% of the stocks in the index failing to beat the benchmark. Therefore, the odds that one will pin down a winner by randomly picking a stock are less than the odds in a fair coin-tossing game. Conversely, hedge funds’ 30 preferred S&P 500 stocks (as of September 2014) generated a return of 9.5% during the same 12-month period, with 63% of these stock picks outperformed the broader market benchmark. Coincidence? It might happen to be so, but it is unlikely. Our research covering a 16-year period indicates that hedge funds’ stock picks generate superior risk-adjusted returns. That’s why we believe it is wise to check hedge fund activity before you invest your time or your savings on a stock like ARC Document Solutions Inc (NYSE:ARC).
ARC Document Solutions Inc (NYSE:ARC) has experienced an increase in enthusiasm from smart money of late. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity, but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Akebia Therapeutics Inc (NASDAQ:AKBA), Tesco Corporation (USA) (NASDAQ:TESO), and Lumos Networks Corp (NASDAQ:LMOS) to gather more data points.
Follow Arc Document Solutions Inc. (NYSE:ARC)
Follow Arc Document Solutions Inc. (NYSE:ARC)
Today there are dozens of gauges investors employ to appraise their holdings. A duo of the best gauges are hedge fund and insider trading signals. We have shown that, historically, those who follow the best picks of the best hedge fund managers can outpace the S&P 500 by a very impressive amount (see the details here).
Now, let’s take a look at the fresh action encompassing ARC Document Solutions Inc (NYSE:ARC).
How are hedge funds trading ARC Document Solutions Inc (NYSE:ARC)?
Heading into Q4, a total of 20 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 11% from one quarter earlier. With hedgies’ sentiment swirling, there exists a few key hedge fund managers who were boosting their holdings significantly (or already accumulated large positions).
When looking at the institutional investors followed by Insider Monkey, Jim Simons’ Renaissance Technologies has the largest position in ARC Document Solutions Inc (NYSE:ARC), worth close to $12 million, corresponding to less than 0.1%% of its total 13F portfolio. The second most bullish fund is D E Shaw, with a $5.6 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Other professional money managers that are bullish comprise Richard S. Pzena’s Pzena Investment Management and Israel Englander’s Millennium Management.
As industry-wide interest jumped, key money managers were leading the bulls’ herd. Whitebox Advisors, managed by Andy Redleaf, created the most valuable position in ARC Document Solutions Inc (NYSE:ARC). Whitebox Advisors had $1.9 million invested in the company at the end of the quarter. Peter Algert and Kevin Coldiron’s Algert Coldiron Investors also initiated a $0.9 million position during the quarter. The other funds with brand new ARC positions are Jeffrey Moskowitz’s Harvey Partners, Glenn Russell Dubin’s Highbridge Capital Management, and Matthew Hulsizer’s PEAK6 Capital Management.
Let’s now take a look at hedge fund activity in other stocks similar to ARC Document Solutions Inc (NYSE:ARC). We will take a look at Akebia Therapeutics Inc (NASDAQ:AKBA), Tesco Corporation (USA) (NASDAQ:TESO), Lumos Networks Corp (NASDAQ:LMOS), and SciQuest, Inc. (NASDAQ:SQI). All of these stocks’ market caps are closest to ARC’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| AKBA | 12 | 19997 | 5 |
| TESO | 10 | 31037 | -4 |
| LMOS | 11 | 59726 | -1 |
| SQI | 13 | 58282 | 0 |
As you can see these stocks had an average of 11.5 hedge funds with bullish positions and the average amount invested in these stocks was $42 million. That figure was $29 million in ARC’s case. SciQuest, Inc. (NASDAQ:SQI) is the most popular stock in this table with 13 funds reporting stakes, while Tesco Corporation (USA) (NASDAQ:TESO) is the least popular one. 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.
