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Did Hedge Funds Drop The Ball On Arrow Electronics, Inc. (ARW) ?

After several tireless days we have finished crunching the numbers from nearly 750 13F filings issued by the elite hedge funds and other investment firms that we track at Insider Monkey, which disclosed those firms’ equity portfolios as of June 28. The results of that effort will be put on display in this article, as we share valuable insight into the smart money sentiment towards Arrow Electronics, Inc. (NYSE:ARW).

Is Arrow Electronics, Inc. (NYSE:ARW) a cheap stock to buy now? Hedge funds are in a pessimistic mood. The number of long hedge fund positions shrunk by 5 recently. Our calculations also showed that ARW isn’t among the 30 most popular stocks among hedge funds (view the video below).
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

Today there are plenty of methods market participants can use to value their holdings. A couple of the most innovative methods are hedge fund and insider trading activity. Our researchers have shown that, historically, those who follow the best picks of the best fund managers can trounce the broader indices by a superb amount (see the details here).

ARW_oct2019

Unlike some fund managers who are betting on Dow reaching 40000 in a year, our long-short investment strategy doesn’t rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. We’re going to take a look at the new hedge fund action encompassing Arrow Electronics, Inc. (NYSE:ARW).

What have hedge funds been doing with Arrow Electronics, Inc. (NYSE:ARW)?

At Q2’s end, a total of 17 of the hedge funds tracked by Insider Monkey were long this stock, a change of -23% from the previous quarter. The graph below displays the number of hedge funds with bullish position in ARW over the last 16 quarters. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Clint Carlson, Carlson Capital

Among these funds, AQR Capital Management held the most valuable stake in Arrow Electronics, Inc. (NYSE:ARW), which was worth $135.9 million at the end of the second quarter. On the second spot was Citadel Investment Group which amassed $130.7 million worth of shares. Moreover, GMT Capital, Pzena Investment Management, and Carlson Capital were also bullish on Arrow Electronics, Inc. (NYSE:ARW), allocating a large percentage of their portfolios to this stock.

Due to the fact that Arrow Electronics, Inc. (NYSE:ARW) has faced declining sentiment from the smart money, it’s safe to say that there is a sect of fund managers that elected to cut their full holdings heading into Q3. It’s worth mentioning that Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital dropped the largest stake of all the hedgies monitored by Insider Monkey, comprising close to $13.1 million in stock, and Joel Greenblatt’s Gotham Asset Management was right behind this move, as the fund dumped about $9.5 million worth. These moves are interesting, as total hedge fund interest fell by 5 funds heading into Q3.

Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Arrow Electronics, Inc. (NYSE:ARW) but similarly valued. These stocks are Kemper Corporation (NYSE:KMPR), Elastic N.V. (NYSE:ESTC), Aluminum Corp. of China Limited (NYSE:ACH), and Autoliv Inc. (NYSE:ALV). This group of stocks’ market valuations are similar to ARW’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
KMPR 19 172679 11
ESTC 27 402508 9
ACH 5 5052 1
ALV 13 452441 0
Average 16 258170 5.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 16 hedge funds with bullish positions and the average amount invested in these stocks was $258 million. That figure was $386 million in ARW’s case. Elastic N.V. (NYSE:ESTC) is the most popular stock in this table. On the other hand Aluminum Corp. of China Limited (NYSE:ACH) is the least popular one with only 5 bullish hedge fund positions. Arrow Electronics, Inc. (NYSE:ARW) is not the most popular stock in this group but hedge fund interest is still above average. Our calculations showed that top 20 most popular stocks among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Hedge funds were also right about betting on ARW, though not to the same extent, as the stock returned 4.6% during the third quarter and outperformed the market as well.

Disclosure: None. This article was originally published at Insider Monkey.

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