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Do Hedge Funds Love Arrow Financial Corporation (AROW)?

The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We at Insider Monkey have plowed through 821 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds’ and investors’ portfolio positions as of March 31st, a week after the market trough. In this article we look at what those investors think of Arrow Financial Corporation (NASDAQ:AROW).

Is Arrow Financial Corporation (NASDAQ:AROW) the right pick for your portfolio? The smart money is in a pessimistic mood. The number of long hedge fund positions decreased by 1 recently. Our calculations also showed that AROW isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks). AROW was in 4 hedge funds’ portfolios at the end of March. There were 5 hedge funds in our database with AROW holdings at the end of the previous quarter.

Video: Watch our video about the top 5 most popular hedge fund stocks.

In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s monthly stock picks returned 72% since March 2017 and outperformed the S&P 500 ETFs by more than 44 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

David Harding

David Harding of Winton Capital Management

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, we believe electric vehicles and energy storage are set to become giant markets, and we want to take advantage of the declining lithium prices amid the COVID-19 pandemic. So we are checking out investment opportunities like this one. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind let’s take a peek at the latest hedge fund action regarding Arrow Financial Corporation (NASDAQ:AROW).

Hedge fund activity in Arrow Financial Corporation (NASDAQ:AROW)

At the end of the first quarter, a total of 4 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -20% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards AROW over the last 18 quarters. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Renaissance Technologies, holds the biggest position in Arrow Financial Corporation (NASDAQ:AROW). Renaissance Technologies has a $11.7 million position in the stock, comprising less than 0.1%% of its 13F portfolio. The second largest stake is held by Winton Capital Management, managed by David Harding, which holds a $0.8 million position; less than 0.1%% of its 13F portfolio is allocated to the stock. Remaining members of the smart money that are bullish encompass John Overdeck and David Siegel’s Two Sigma Advisors, Ken Griffin’s Citadel Investment Group and . In terms of the portfolio weights assigned to each position Winton Capital Management allocated the biggest weight to Arrow Financial Corporation (NASDAQ:AROW), around 0.02% of its 13F portfolio. Renaissance Technologies is also relatively very bullish on the stock, designating 0.01 percent of its 13F equity portfolio to AROW.

We view hedge fund activity in the stock unfavorable, but in this case there was only a single hedge fund selling its entire position: Arrowstreet Capital. 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 750+ hedge funds tracked by Insider Monkey identified AROW as a viable investment and initiated a position in the stock.

Let’s now review hedge fund activity in other stocks similar to Arrow Financial Corporation (NASDAQ:AROW). We will take a look at Huize Holding Limited (NASDAQ:HUIZ), Verastem Inc (NASDAQ:VSTM), FRP Holdings Inc (NASDAQ:FRPH), and Bridge Bancorp, Inc. (NASDAQ:BDGE). This group of stocks’ market values resemble AROW’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
HUIZ 1 262 1
VSTM 17 173703 9
FRPH 7 33574 -1
BDGE 7 60476 -3
Average 8 67004 1.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 8 hedge funds with bullish positions and the average amount invested in these stocks was $67 million. That figure was $13 million in AROW’s case. Verastem Inc (NASDAQ:VSTM) is the most popular stock in this table. On the other hand Huize Holding Limited (NASDAQ:HUIZ) is the least popular one with only 1 bullish hedge fund positions. Arrow Financial Corporation (NASDAQ:AROW) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 8.3% in 2020 through the end of May and surpassed the market by 13.2 percentage points. Unfortunately AROW wasn’t nearly as popular as these 10 stocks (hedge fund sentiment was quite bearish); AROW investors were disappointed as the stock returned 5% during the second quarter and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.

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